by Ian Cooper
One of the easiest “set it, and forget it” strategies is the Dogs of the Dow.
With the strategy, you simply buy the top 10 highest-yielding stocks on the most beaten-down stocks on the Dow. A year from now, you close them out – hopefully for wins – and repeat with a new batch.
For some history: In 2022, one of the worst years on record since 2008, the NASDAQ lost 33%. The S&P 500 lost 19%. The Dow Jones lost about 9%. Meanwhile, the Dogs of the Dow returned about 2%. Granted, 2% is small, but it’s better than a loss any day.
In 2021, the Dogs of the Dow returned about 16.3%. While 2020 wasn’t a great year for the Dogs, most other years have done very well. In 2019, the Dogs were up 20%. In 2018, they were up about 1%, but still beat the Dow, which fell close to 6%. In 2017, the dogs were up 19%. In 2016, they were up 16%.
So far, here’s how the 2023 Dogs are performing since the start of January.
- Verizon (VZ) – which has a current yield of 8.21% — fell from about $38 to $32.41
- Dow Inc. (DOW) – with a yield of 5.43% — ran from $49.99 to $51.56
- Intel (INTC) – with a yield of 1.41% — ran from $26.72 to $35.55
- Walgreens (WBA) – with a yield of 8.63% — fell from about $37 to $22.24
- 3M (MMM) – with a yield of 6.41% — fell from about $120 to $93.62
- IBM (IBM) – with a yield of 4.73% — is up slightly from $140 to $140.30
- Amgen (AMGN) – with a yield of 3.17% — fell from about $258 to $268.76
- Cisco (CSCO) – with a yield of 2.9% — jumped from about $47.48 to $53.76
- Chevron (CVX) – with a yield of 3.58% — fell from about $176 to $168.62
- JPMorgan Chase (JPM) – with a yield of 2.9% — ran from about $134 to $145.02
Granted, a 50%-win rate in 2023 is nothing to write home about. However, once you include the dividends, the numbers get even better.
While you can always buy into each of the Dogs of the Dow at the end of every year, you can also gain exposure to them with ETFs, such as:
ALPS International Sector Dividend Dogs ETF (IDOG)
With an expense ratio of 0.50%, the ETF applies the ‘Dogs of the Dow Theory’ on a sector-by-sector basis using the S-Network Developed Markets (ex-Americas) Index as its starting universe of eligible securities, as noted by ALPSFunds.com. IDOG provides high dividend exposure across 10 sectors of the market by selecting the five highest yielding securities in each sector and equally weighting them.
Invesco Dow Jones Industrial Average Dividend ETF (DJD)
With an expense ratio of 0.07%, the DJD ETF — based on the Dow Jones Industrial Average Yield Weighted Index — will invest at least 90% of its total assets in common stocks that comprise the Index, as noted by Invesco.com. Some of its top holdings are the top Dogs of the Dow, such as Verizon, IBM, 3M, Dow, Walgreens, Chevron, Amgen, Cisco, and Coca-Cola to name a few.