The “Dogs of the Dow” is a simple but successful value
investing strategy that many on Wall Street swear by. It’s easy: At the
beginning of the year, buy the 10 highest-yielding dividend stocks in the Dow
Jones Industrial Average. Hold them for a year. Next year, rinse and repeat.
While this does result in higher-than-average income, the
investment case really is a value one. The idea: A high dividend yield – in the
kind of rock-solid blue-chip stocks the Dow tends to hold – implies that shares
are oversold. Meanwhile, the continued payment of dividends shows that
management remains confident in the company’s earnings. Investors thus should
profit both from an above-average yield, as well as an eventual recovery in
share prices once Wall Street realizes its selling has gone too far.
How well does the strategy work? In 2018, the Dogs of the
Dow lost just 1.5% on average versus a 5.6% decline for the Dow and a 6.2% drop
for the Standard & Poor’s 500-stock index. The win marked the Dogs’ fourth
consecutive year of outperformance. And already in 2019, some Dogs are baring
their fangs.
Here are the 10 dividend stocks that make up the Dogs of the
Dow, listed in order of their dividend yields as of the start of 2019. We also
list their current yields, which have shifted a bit in the first few days of
this year’s trading.
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