As market volatility increases, dividend-paying names should gain more attention
Passive-income seekers see the start of a given year as an
opportunity to participate in the “Dogs of the Dow” strategy. What’s that
investment method? Well, investors buy the 10 highest-yielding stocks from the
Dow Jones Index — say at the start of 2022 — and hold them for 12 months. Then,
in 2023, they invest in the next set of 10 highest-yielding stocks and
rebalance their portfolios.
While this may look like a dividend strategy, its roots are
actually based on value investing. Put another way, the high dividend yield
could be an indication that a company’s share price has bottomed out. Stocks
with high dividends relative to their stock price are considered near the
bottom of their business cycle, representing bargains for value investors.
Still, recent research reveals “mixed findings” on the
validity of this process. The Dogs have indeed trailed the index in each of the
past four years, primarily reflecting investor appetite for high-growth stocks
during that period. Yet, as value stocks begin to regain their momentum, 2022
may finally be the year for the Dogs of the Dow.
So, with that information, here are 10 dividend stocks to
buy if you want to follow this strategy for the year:
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