🐕 The Dogs of the Dow 2024
Have you ever heard about the Dogs of the Dow?
It’s a strategy where you buy the 10 companies with the highest dividend yield.
Let’s teach you everything you need to know about this simple strategy.
Introducing the “Dogs”
The “Dogs” are the 10 stocks in the Dow Jones Industrial Index (DJIA) with the highest dividend yield.
Following the strategy is simple.
- At the end of the year, you select the 10 stocks in the DJIA with the highest dividend yield
- Invest an equal dollar amount in each on the first trading day of the new year
- Hold the portfolio for a year
- Repeat the process each year
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What is the Dow Jones?
The Dow Jones Industrial Average, or just “the Dow” is one of the oldest market indexes. It’s been around since 1896 (!).
The Dow Jones Industrial Average (DJIA) was first published on May 26, 1896. At that time, the index stood at 40.94.
Can you guess the return you would have made when you invested in DJIA in 1896?
The correct answer is almost 100,000%!
Great things happen to those who invest with a long-term mindset.
Source: Investopedia
Unlike the S&P 500 and NASDAQ, which are loaded with tech, the Dow Jones focuses on:
- Large, well-established, financially sound companies
- with long histories of steady dividend payments
This is a perfect group for dividend investors to start with!
The average dividend yield of companies within the Dow Jones is currently 1.7%.
Why are they called “Dogs”?
The idea is that the stocks pay a high dividend yield because their price has fallen.
The low prices are an indication that they’re out of favor with investors, or “in the doghouse.”
That’s why investors call them “dogs.”
Why should you buy the “Dogs”?
Do you know why it might be interesting to look at the Dogs?
Dividend payments aren’t as volatile as stock prices, the high yield might indicate that these companies are undervalued.
Here’s 3M’s dividend yield in red and the stock price in blue.
When the price goes down, the yield goes up and the other way around.
Source: Finchat
The companies in the Dow are generally high-quality.
The theory is that the prices are being pushed down by something temporary.
Why would you use this strategy?
The main reason?
Because it’s very easy and straightforward.
It’s a contrarian, value-based strategy. You want to:
- Buy companies with a high dividend yield
- Where the stock price hopefully goes up
How has it performed?
Over very long periods, the Dogs of the Dow strategy has outperformed the index.
Here’s an idea of what you would have experienced if you started following the strategy since 2007:
Source: Investopedia
However, it’s also important that this strategy doesn’t outperform all the time.
Between 2018 and 2023, the Dogs have trailed the DJIA. Here are the yearly returns for both during this period.
- Dogs of the Dow: 5.29%
- DJIA: 8.39%
By definition, every active investment strategy underperforms from time to time.
The Dogs of The Dow 2024
Here are the “Dogs” for 2024:
Source: bluerating.com
If you were following this strategy, you would have captured the 20% jump in 3M’s share price this month, plus you’d already have $1.96 in dividends for each share you owned!
Source: Finchat
Conclusion
Here are the key takeaways from today’s article:
- The Dog of the Dows is a very simple and easy strategy
- You buy the 10 companies with the highest dividend yield within the Dow Jones
- The current list includes among others Walgreens, Verizon, 3M, and Coca-Cola
Ultimately, the Dogs of the Dow is a shortcut.
It will give you 10 companies with a high dividend yield.
To learn how to build a stable portfolio of wonderful businesses that will grow year after year, make sure you’re subscribed to Compounding Dividends.
Let’s compound our dividends together!
That’s it for today
That’s it for today.
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Used sources
- Interactive Brokers: Portfolio data and executing all transactions
- Finchat: Financial data