The “Dogs of the Dow” is a time-tested investment strategy that aims to identify high-yielding, blue-chip stocks in the Dow Jones Industrial Average (DJIA) that may be undervalued and poised for recovery. Popularized in the early 1990s by Michael O’Higgins in his book Beating the Dow, the strategy has attracted long-term investors seeking simplicity, consistency, and strong dividend returns.
History and Origins
The concept behind the Dogs of the Dow is rooted in value investing. O’Higgins’ insight was that within the 30-stock DJIA, some companies fall out of favor and see their share prices decline — but often, these same companies continue to pay robust dividends. By selecting the ten highest-yielding stocks in the Dow at the start of each year, the strategy assumes these “dogs” are temporarily out of favor and will rebound over time.
Over the years, the strategy has demonstrated mixed results. In some years, it has outperformed the broader market; in others, it has lagged. However, its low-maintenance nature and emphasis on dividends have made it popular among income-focused investors.
How the Strategy Works
- Start with the Dow 30: The DJIA includes 30 of the most established companies in the U.S. economy, like Coca-Cola, IBM, and Chevron.
- Identify the 10 Highest-Yielding Stocks: At the end of each year (often December 31), rank all 30 stocks by their dividend yield — the annual dividend divided by the stock price. Select the 10 stocks with the highest yields.
- Invest Equally in All 10: Allocate an equal amount of money to each of these 10 stocks at the beginning of the year.
- Hold for One Year: Keep the investments unchanged for the entire calendar year.
- Repeat Annually: At the end of the year, repeat the process — re-identify the top 10 high-yield stocks and rebalance your portfolio.
Why It Can Work
The Dogs of the Dow strategy is rooted in the belief that high dividend yields signal undervalued stocks. Because the Dow includes only large, stable companies, the risk of complete failure is lower than with lesser-known stocks. Over time, if these companies return to favor, their stock prices tend to rise, lowering the dividend yield and rewarding patient investors.
While not foolproof, the Dogs of the Dow strategy is a disciplined, mechanical approach for investors who value simplicity, dividends, and a long-term outlook.
As of January 1, 2025, the official “Dogs of the Dow”—the 10 highest-yielding stocks in the Dow Jones Industrial Average (DJIA)—are:
Stock market information for Verizon Communications Inc (VZ)
- Verizon Communications Inc is a equity in the USA market.
Stock market information for Chevron Corp. (CVX)
- Chevron Corp. is a equity in the USA market.
Stock market information for AMGEN Inc. (AMGN)
- AMGEN Inc. is a equity in the USA market.
Stock market information for International Business Machines Corp. (IBM)
- International Business Machines Corp. is a equity in the USA market.
Stock market information for Cisco Systems, Inc. (CSCO)
- Cisco Systems, Inc. is a equity in the USA market.
Stock market information for Coca-Cola Co (KO)
- Coca-Cola Co is a equity in the USA market.
Stock market information for McDonalds Corp (MCD)
- McDonalds Corp is a equity in the USA market.
Stock market information for Proter & Gamble (PG)
- PG is a equity in the USA market.
Stock market information for Johnson & Johnson (JNJ)
- Johnson & Johnson is a equity in the USA market.
Stock market information for Merck & Co (MRK)
- Merck & Co is a equity in the USA market.
The strategy involves investing equal amounts in these ten stocks at the beginning of the year and holding them for the entire year, aiming to capitalize on both dividend income and potential price appreciation. It’s important to note that while this strategy has historical significance, its performance can vary annually, and investors should consider their individual financial goals and risk tolerance before investing
