"Popularized by Michael O'Higgins in his book, Beating the Dow , the Dogs of the Dow strategy selects the 10 highest dividend-yielding stocks from the 30 components of the DJIA at the end of each year. Investors buy equal amounts of these stocks, hold them for one year, then sell and repeat the process with the new list. This approach focuses on value stocks, as high yields typically result from price declines, providing potential for recovery alongside steady income."
"Another is a four-stock method, which starts with those same five companies, but excludes the highest-yielding one if it is also the cheapest, as research indicates such stocks often underperform the group. Last month, I pointed out this four-stock play is smarter because it avoids drags on returns, as seen in 2025 when excluding Verizon boosted performance from 16.7% (excluding dividends) for the five-stock portfolio to 20.7% for the four-stock version."
The Dogs of the Dow strategy selects the 10 highest dividend-yielding stocks from the DJIA and holds equal-weighted positions for one year. High yields typically follow price declines, so the approach targets value stocks with recovery potential plus dividend income. Variants include Small Dogs (the five lowest-priced among the top 10 yielders) and a four-stock method that excludes the highest-yielding stock when it is also the cheapest. In 2025 a four-stock variant returned 25% including dividends versus the Magnificent 7's 24.8%; excluding Verizon raised the four-stock return to 20.7% versus 16.7% for five stocks. Early 2026 shows Dogs variants outperforming the Magnificent 7 by roughly four-to-one.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]