Current dogs of the dow: The ‘Dogs of the Dow’ for 2022 could hold some big winners Here’s the list

A tough year for energy stocks pushed Chevron’s share price down far enough for its dividend yield to rise to the top, and poor performance for Walgreens pushed it well up the list as well. The main reason there were any openings at all was that ExxonMobil and Pfizer were removed from the Dow 30 entirely. The Dogs of the Dow strategy works best when the market focuses on value investing principles. Because most Dow stocks have stable dividends, they tend to move toward the top of the Dogs list when some short-term event causes their share prices to fall.

This allows investors to execute a simple strategy of selecting the top 10 highest-yielding stocks and putting an equal amount of money into each one. When it comes to an investing strategy, most investors will agree that simple is better. And one way for any investor to invest in blue chip stocks is to invest in stocks that are listed on the Dow Jones Industrial Average . As you can see above, most of the stocks in the Dogs of the Dow carried over from the 2020 list.

Dogs of the Dow

He said that, for the year 2013, using the price weighting the Dogs would have returned less, rather than more, than the DJIA. He suggested that the Dogs strategy is too simple and it neglects factors such as dividend–payout ratio (i.e., how much of the company’s profits are devoted to dividends), growth of cash and earnings, and price performance. However, he did not offer advice on how to integrate these factors into the Dogs method. He also criticized the Dogs strategy for back-testing, which can be susceptible to data mining or other shortcomings.

Income investors should consider whether the Dogs of the Dow could be the answer they’ve looked for in order to generate more cash from their investments. A 1998 study found the Dogs of the Dow exploited the “market overreaction hypothesis”, taking advantage of investor psychology and the tendency to overreact to negative news. However, the study also noted that the Dow stocks with high-dividend yield were not necessarily the worst performers any given year, which might undermine the strategy’s performance occasionally. By repeating this process each year, investors can — in theory — take advantage of these temporary price dislocations and an eventual recovery, profiting from above-average dividend yields along the way.

The same amount of current dogs of the dow invested in the Dogs of the Dow would have grown to $21,420. But for most investors, the question is what have you done for me lately? In eight of the 10 years between 2011 and 2018, investors who followed a Dogs of the Dow strategy would have seen returns that outpaced the Dow index.

To use this strategy, one starts by investing equal amounts into the 10 highest-dividend-yielding stocks from the Dow Jones Industrial Average. The idea is that by selecting from only the 30 stocks in the Dow, investors are already filtering to blue-chip companies. The Dogs of the Dow strategy has gained in popularity since Michael O’Higgins’ book, Beating the Dow, was first published in 1991. The idea behind this strategy is that investors can profit from the relative strength of Dow stocks and the opportunity to buy undervalued components using dividend yield as a proxy for valuation. The underlying thesis is that these “dogs” are often down for short-term reasons, and the market’s overreaction has created an opportunity for contrarian investors.

Dogs of the Dow Stocks

Now, Johnson & Johnson still doesn’t strike me as a no-brainer buy in this moderate share price dip. There are too many balls in the air, and that baby powder lawsuit could end up costing more than $10 billion. I won’t make any serious investment in this stock until the dust settles around Johnson & Johnson’s potentially costly courtroom battle. Furthermore, Johnson & Johnson also comes with a modest price-to-earnings ratio but a sky-high cash flow valuation.

But the https://forex-world.net/s of the Dow strategy proposes these same stocks have the potential for substantial increases in stock price plus relatively high dividend payouts. Put another way, a company that has a high dividend relative to its stock price are considered to be at the bottom of their business cycle. This means that there is a higher likelihood that the stock price of these companies will rise faster than companies with low dividend yields. Therefore an investor who continually reinvests in high-dividend-yielding stocks should outperform the market on an annual basis. On January 8, 2014, asset manager John S. Tobey wrote an article in Forbes magazine where he criticized the Dogs method. Tobey proposed the equal-weighting method for the Dogs made it difficult or impossible to accurately compare to the DJIA, which uses a different method of price-weighting the stocks.

This suggests that an investor would be best served by viewing this as a longer-term strategy by giving this portfolio of stocks time to recover in case of a rare-but-extreme economic event (e.g., dot-com boom, financial crisis). However, none of these dogs of the Dow appear to be fantastic buys at the moment, with plenty of more promising investment ideas available in other corners of the current market. In these uncertain times, it’s perfectly fine for investors to leave the dogs alone and go for better options elsewhere. This company is not spinning off any of its business operations and does not face lawsuits of a potentially game-changing scale.

From there, put the stocks in order and take the 10 highest-yielding ones. Then, buy equal dollar amounts of all 10 stocks and keep them in your portfolio throughout the following year. That’s all you have to do until the end of the following year, when you repeat the process.

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For more information on exactly what it takes for a stock to become one of the Dogs of the Dow or Small Dogs of the Dow, be sure to check out Dog Steps. That’s all it takes, and there’s nothing more to do until the end of the year. At that point, you can either close out the strategy or continue into the next year. If you choose to keep investing in the Dogs of the Dow, you’ll need to replace any stocks that are no longer among the 10 highest-yielding Dow dividend stocks and purchase shares of any new stocks on the list.

Meanwhile, biotech pioneer Amgen is brand new to the Dow, adding another healthcare angle to the Dogs. A 5% drop in its stock price reflected the same lack of attention as most companies in the industry that didn’t have a COVID-19 vaccine or treatment candidate in the headlines, but Amgen’s long-term performance has been strong. Its prospects for 2021 are also encouraging, with blockbusters like osteoporosis fighter Prolia and immunosuppressant drug Enbrel carrying the weight as Amgen works on prospective treatments in high-value areas. It’s only fitting that pharmaceutical giant Merck stepped into the No. 8 spot on the Dogs list for 2021. The company is an archrival of Pfizer’s, and its stock underperformed both the Dow and Pfizer’s own stock in 2020, pushing its dividend yield above the threshold. Merck’s dividend yield reflects the ample cash flow from blockbuster drugs in its arsenal, but the company also faces similar pressures to Pfizer in keeping its pipeline of new treatments full.

If that’s merely a short-term issue, then the stock often rises over the course of the year, outperforming the broader average and then making way for a new hard-hit stock to take its place. Few strategies are easier than the Dogs of the Dow in terms of implementation. On the last trading day of the year, you take the dividend yields of all 30 Dow stocks.

For example, for the twenty years from 1992 to 2011, the Dogs of the Dow on average matched the average annual total return of the DJIA (10.8 percent) and outperformed the S&P 500 (9.6 percent). The Dogs of the Dow is an investment strategy popularized by Michael B. O’Higgins in a 1991 book and his Dogs of the Dow website. We recommend that you sign up to receive our free Dogs of the Dow Newsletter. Doing so will keep you up to date with all that goes on here at Dogs of the Dow and alert you to high dividend paying stock opportunities as well as any official Dogs of the Dow revisions. At the same time, Honeywell sports a historically high order backlog worth $30 billion and robust bottom-line profits — both as Uncle Sam counts them after taking his share and as the cold, hard dollar bill flies. Unsold inventories are piling up in some warehouses, and many customers are dragging out their agreed payments.

The results in 2019 and 2020 were not favorable, with the Dogs of the Dow portfolio generating 18.7% and (7.9%) in total returns respectively, while the Dow returned 25.3% and 9.7% in those years. In 2021, Dogs of the Dow once again outperformed, with 25.3% in total returns, compared to 21% for the index. In 2018, the Dow generated 21% in total returns, while the Dogs of the Dow portfolio would have generated 27% in total returns. Four of the Dogs returned more than 45%, more than making up for the six Dogs that underperformed the index (one of which lost 8% in value). These cycles aren’t unprecedented, though, and in the past, they’ve often led to future outperformance from the Dogs.

In addition to stock price and YTD percent change, the current dividend yield is included for each Dow stock. Summary data (e.g. YTD percent change and dividend yield) for the Dogs of the Dow, Small Dogs of the Dow, Dow 30, and Dow Jones Industrial Average are included below. Don’t miss out on important revisions to the official Dogs of the Dow. This means that the dividend, as opposed to a company’s current stock price, is the better measure of a company’s average worth. Under this model, the investor buys an equal number of the ten company’s shares.

Because dividend yields are higher than the interest rate paid out by most bond funds, investing in a Dogs of the Dow mutual fund or ETF can be a more profitable alternative to bond funds. The risk of these funds is that these funds lack the diversity of other funds. Although it’s hard to say for sure why the Dogs of the Dow strategy works, a common thought is that the companies that make up the Dogs will not alter their dividend strategy based on their stock price. This means that even when these companies are going through difficulties, they will maintain – and in many cases – increase their dividend.

However, waiting it out with a 5% yield, and the financial strength to maintain it, may prove to be alluring for many investors. In most instances, the proposition here comes down to getting paid a lot to wait out whatever malaise a company is facing. The Dogs of the Dow strategy produced a price change of -1.8%, beating the Dow’s performance by about 7 percentage points. Moreover, when you add the roughly 4% yield that the Dogs of the Dow paid, they saw their return move into positive territory at around 2%.

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• 2021’s underperformance marked the third straight year of the Dogs losing to the broader Dow.
• This strategy is similar to investing in an index fund, but is actually much simpler since it is truly a “set it and forget it” strategy.
• This time, a settlement of 10,000 baby powder lawsuits three years ago has now ballooned into 38,000 cases as the lawsuit process is moving again.

The following table lists the ten highest yielding Dow stocks as of the close on December 30, 2022. Of these ten Dow stocks, the five stocks with the lowest closing price are the 2023 Small Dogs of the Dow. For all steps required to invest in the 2023 Dogs of the Dow, get the free Dogs of the Dow Checklist. Yet those who narrowed their look at Dow stocks to focus on top dividend payers in the popular index fared even better, as the strategy known as the Dogs of the Dow made money in 2022. Professor Burton Malkiel discusses the Dogs of the Dow in the 1999 version of his book A Random Walk Down Wall Street.

That could mean that growth stocks catch up to value later in the year, but Simpson is skeptical that scenario plays out. There are few changes to next year’s Dogs list, which is headlined by Verizon . The telecom provider saw its stock price fall 24% this year, raising its dividend yield above 6%. Two new additions to the list, based on dividend yields as of Dec. 28, are JPMorgan and Cisco . Those two replace Merck and Coca-Cola , which fall out after outperforming the market this year.