These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. The Dogs of the Dow is a well-known strategy first published in 1991. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years.

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. To implement this strategy, take the amount of money you have to invest and then divide it equally among the 10 highest-yielding stocks in the DJIA. Hold these stocks for a whole year and then at the end of 12 months, look at the 30 Dow stocks again and resort them by dividend yield from highest to lowest. “Dogs of the Dow” is an investment strategy that attempts to beat the Dow Jones Industrial Average each year by leaning portfolios toward high-yield investments.

How does the ‘Dogs of the Dow’ strategy work?

In theory, this should help investors find well-established companies that offer healthy yield and may be due for a rebound. Investors can also use the Dogs criteria as a starting point and then select the names on the list they are most confident in for next year. On average, however, the Dogs had total return in 2022 of roughly 1.5%. That means that if an investor put equal money in all 10, the portfolio would have easily outpaced any of the major indexes.

Our experts choose the best products and Current dogs of the dow to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our partners; however, our opinions are our own. The inclusion of a company in the Dow Jones Industrial Average does not depend on defined criteria.

Filtering to blue-chip stocks in the Dow helps lower this risk to some extent but certainly doesn’t eliminate it. Like the Swiss Market Index , the Dow Jones is a price index. The shares included in it are weighted according to price; the index level represents the average of the shares included in it.

The 3-Day Down Overnight Trading Strategy In The S&P 500 (3 Down Days – And Gap Up?)

Adjusted earnings-per-share of $1.19 compared unfavorably to $1.31 in the prior year but was in-line with estimates. Sales from continuing operations grew 3% over the prior year’s quarter. However, adjusted earnings-per-share slumped 27% year-over-year to $1.16 from $1.59, mostly due to high Covid-19 vaccinations in the prior year. The company has now beaten analysts’ estimates for eleven consecutive quarters.

CFI is the official provider of the Financial Modeling and Valuation Analyst ™ certification program, designed to transform anyone into a world-class financial analyst. The approach was popularized in the book Beating the Dow by Michael O’Higgins and John Downes. The book provides a basic outline of the approach, along with descriptions of each of the Dow stocks. Kevin L. Matthews II is a No. 1 bestselling author and former financial advisor.

Analysis

Whether the company emerges from its diminished status in 2021 might be a toss of the coin then, but throwing in the known unknowns of the pandemic, substantive growth in Amgen shares may take more than a year. To put this in context, earnings for 2020 were $0.52, down from $4.32 the prior year. Walgreens seems to be a hole that will take more than a year to dig out of.

Despite supply chain issues, Cisco benefited from strong demand for network equipment, and it sees growth picking back up in the near future. Rising oil prices during 2021 helped Chevron rise, while Walgreens bounced back from adversity to benefit from people needing health services. The strategy has underperformed given the distaste for value stocks in recent years, but it often outperforms when value comes into favor. It was the first year since 2018 that the Dogs outperformed the Dow Jones Industrials. Shares suffered when a combination of rising interest rates and the tough market environment for investment banking dealt the financial giant a double whammy.

Other Dow strategies

This is not always the case, as a stock could have a high yield and trade at high multiples of both earnings and book value. On the first trading day of January, take the total amount that you’re investing and invest 10% into each of the 10 stocks. If you’re investing $10,000 then you would have $1,000 in each of the stocks. The Dogs of the Dow was popularized in 1991 when Michael B. O’Higgins published his book, “Beating the Dow.” The term “dog” refers to stocks that have fallen out of favor.

Investors can use these stocks to execute a profitable strategy that attempts to beat the DJIA average by tilting their portfolio to high-yield dividend stocks. Using the Dogs of the Dow investment strategy, Tim would choose the top ten dividend-yielding stocks from the list above. At the beginning of the year, evenly allocate the capital in your portfolio to each of the top ten dividend-yielding stocks on the Dow. Revenues, operating income, and case volume all declined, in some cases precipitously, in the three quarterly reports that were issued in 2020. Coke is somewhat binary, in that a return to normality in 2021 will lend a big boost to its business.

Adjusted earnings-per-share of $4.09 compared unfavorably to $4.40 in the prior year but was in line with estimates. The company’s adjusted earnings-per-share for the quarter blew away expectations, coming in at $3.56, which was 46 cents ahead of estimates. Revenue surged 18% year-over-year to $34.5 billion, which was $270 million more than expected.

Get https://forex-world.net/ recommendations, portfolio guidance, and more from The Motley Fool’s premium services. In the backtests below we compare the DOD strategy to S&P 500 – not Jow Jones 30. We do that because we believe this is a better benchmark than the Dow Jones 30.

Alternatively, you can go through exchange-traded funds that invest in the stocks that make up the Dogs of the Dow. Businesses outside of GARDASIL such as oncology and animal health, a much larger portion of revenues, are notching solid gains. With two promising covid vaccines in the pipeline, there are enough wildcards in the mix to get Merck out of the doghouse in 2021. Professor Burton Malkiel discusses the Dogs of the Dow in the 1999 version of his book A Random Walk Down Wall Street. O’Higgins and others back-tested the strategy as far back as the 1920s and found that investing in the Dogs consistently outperformed the market as a whole.

The company currently has a dividend yield of 5.5%, significantly above its five-year average high of 3.3%. In January 2022, the company increased its dividend payment by 5.0% for its eighth consecutive year of increases. Intel also has a price-earnings (P/E) ratio of 8.2, below its five-year average of 12.0. Chevron benefited from increased crude oil prices, as inflation and geopolitical conflict increased costs to the company. Chevron was able to pass increased costs to the consumer and saw sales growth and net income growth of 64.7% and 381.9% in 2022, respectively.

He also criticized the Dogs strategy for back-testing, which can be susceptible to data mining or other shortcomings. He also predicted that the strategy would not work well for 2014. However, another advantage of investing in Dow stocks is that every one of the 30 Dow components pays a dividend. 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. Regardless of whether the Dogs of the Dow outperform the stock market in 2023, many will find that the simple strategy gives them an easy way to get market exposure without a lot of hassle.

This investment strategy attempts to beat the Dow Jones Industrial Average each year by leaning portfolios toward high-yield investments. However, while it has outperformed until it was revealed, our backtests reveal that the Dogs Of The Dow strategy has underperformed compared to S&P 500 during the last couple of decades. For example, if the portfolio is now worth $15,000, the investor would sell his positions and re-allocate $1,500 to each of the new top ten dividend-yielding stocks on the Dow.

• On January 24th, 2023, 3M reported fourth-quarter and full-year earnings results.
• To do this, the Dogs of the Dow strategy simply calls for owning a portfolio of the 10 Dow Jones Industrial Average stocks with the highest dividend yields and rebalancing it annually.
• The Dogs of the Dow strategy produced a price change of -1.8%, beating the Dow’s performance by about 7 percentage points.
• Investors can execute a Dogs of the Dow strategy by rebalancing their portfolio on an annual basis.
• Total deposits were $2.34 trillion, down from $2.41 trillion in the prior quarter.

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Intrinsic Value of a Stock Value is an important metric to consider when evaluating stocks. When a company is out of compliance with an exchange, this is what can happen. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

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. 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.