S&P 500   3,960.91 (-0.07%)
DOW   33,712.30 (-0.20%)
QQQ   284.06 (+0.07%)
AAPL   144.20 (+1.09%)
MSFT   246.83 (-0.23%)
META   116.81 (+1.28%)
GOOGL   93.47 (-0.26%)
AMZN   89.27 (-1.20%)
TSLA   179.42 (+3.45%)
NVDA   173.17 (+0.86%)
NIO   12.76 (-4.85%)
BABA   91.96 (-2.35%)
AMD   69.66 (-1.15%)
T   19.24 (+0.63%)
MU   55.41 (+0.38%)
CGC   2.93 (-5.18%)
F   13.23 (+0.84%)
GE   82.30 (-1.59%)
DIS   94.00 (+1.57%)
AMC   5.89 (-2.97%)
PYPL   74.23 (+0.01%)
PFE   51.90 (+0.23%)
NFLX   325.69 (+4.97%)
S&P 500   3,960.91 (-0.07%)
DOW   33,712.30 (-0.20%)
QQQ   284.06 (+0.07%)
AAPL   144.20 (+1.09%)
MSFT   246.83 (-0.23%)
META   116.81 (+1.28%)
GOOGL   93.47 (-0.26%)
AMZN   89.27 (-1.20%)
TSLA   179.42 (+3.45%)
NVDA   173.17 (+0.86%)
NIO   12.76 (-4.85%)
BABA   91.96 (-2.35%)
AMD   69.66 (-1.15%)
T   19.24 (+0.63%)
MU   55.41 (+0.38%)
CGC   2.93 (-5.18%)
F   13.23 (+0.84%)
GE   82.30 (-1.59%)
DIS   94.00 (+1.57%)
AMC   5.89 (-2.97%)
PYPL   74.23 (+0.01%)
PFE   51.90 (+0.23%)
NFLX   325.69 (+4.97%)
S&P 500   3,960.91 (-0.07%)
DOW   33,712.30 (-0.20%)
QQQ   284.06 (+0.07%)
AAPL   144.20 (+1.09%)
MSFT   246.83 (-0.23%)
META   116.81 (+1.28%)
GOOGL   93.47 (-0.26%)
AMZN   89.27 (-1.20%)
TSLA   179.42 (+3.45%)
NVDA   173.17 (+0.86%)
NIO   12.76 (-4.85%)
BABA   91.96 (-2.35%)
AMD   69.66 (-1.15%)
T   19.24 (+0.63%)
MU   55.41 (+0.38%)
CGC   2.93 (-5.18%)
F   13.23 (+0.84%)
GE   82.30 (-1.59%)
DIS   94.00 (+1.57%)
AMC   5.89 (-2.97%)
PYPL   74.23 (+0.01%)
PFE   51.90 (+0.23%)
NFLX   325.69 (+4.97%)
S&P 500   3,960.91 (-0.07%)
DOW   33,712.30 (-0.20%)
QQQ   284.06 (+0.07%)
AAPL   144.20 (+1.09%)
MSFT   246.83 (-0.23%)
META   116.81 (+1.28%)
GOOGL   93.47 (-0.26%)
AMZN   89.27 (-1.20%)
TSLA   179.42 (+3.45%)
NVDA   173.17 (+0.86%)
NIO   12.76 (-4.85%)
BABA   91.96 (-2.35%)
AMD   69.66 (-1.15%)
T   19.24 (+0.63%)
MU   55.41 (+0.38%)
CGC   2.93 (-5.18%)
F   13.23 (+0.84%)
GE   82.30 (-1.59%)
DIS   94.00 (+1.57%)
AMC   5.89 (-2.97%)
PYPL   74.23 (+0.01%)
PFE   51.90 (+0.23%)
NFLX   325.69 (+4.97%)

Dogs of the Dow Stocks

The Dogs of the Dow is an investment strategy developed by Michael O'Higgins in 1991 which suggests that each year investors should buy the ten Dow Jones Industrial Average (DJIA) stocks whose dividend is the highest percentage of their share price. Using other stock analysis methods, these stocks would be considered to be undesirable, or "dogs," but the Dogs of the Dow strategy proposes that these stocks have the same stocks have the potential for substantial increases in stock price plus relatively high dividend payouts. How the Dogs of the Dow strategy works.

MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.
Available with a MarketBeat All Access Subscription
MarketRank™Upgrade to All Access to use the All Ranks Filter
Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
Available with a MarketBeat All Access Subscription
Media SentimentUpgrade to All Access to use the All Sentiments Filter
Analyst consensus is the average investment recommendation among Wall Street research analysts.
Available with a MarketBeat All Access Subscription
Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyCurrent PriceDividend YieldPayout RatioP/E RatioDog of the Dow?
Verizon Communications Inc. stock logo
VZ
Verizon Communications
$2.616.96%56.62%8.05Yes
Dow Inc. stock logo
DOW
DOW
$2.805.51%36.32%6.56Yes
Intel Co. stock logo
INTC
Intel
$1.465.14%44.92%8.78Yes
Walgreens Boots Alliance, Inc. stock logo
WBA
Walgreens Boots Alliance
$1.924.73%38.40%8.18Yes
3M stock logo
MMM
3M
$5.964.70%51.92%10.98Yes
International Business Machines Co. stock logo
IBM
International Business Machines
$6.604.46%481.76%107.87Yes
Exxon Mobil Co. stock logo
XOM
Exxon Mobil
$3.643.50%29.71%8.52Yes
Chevron Co. stock logo
CVX
Chevron
$5.683.36%32.31%9.87Yes
Cisco Systems, Inc. stock logo
CSCO
Cisco Systems
$1.523.11%54.87%17.69Yes
Pfizer Inc. stock logo
PFE
Pfizer
$1.603.08%30.77%9.96Yes
JPMorgan Chase & Co. stock logo
JPM
JPMorgan Chase & Co.
$4.003.01%33.78%11.25No
The Goldman Sachs Group, Inc. stock logo
GS
The Goldman Sachs Group
$10.002.77%26.63%9.61No
The Coca-Cola Company stock logo
KO
Coca-Cola
$1.762.77%76.86%27.73No
Johnson & Johnson stock logo
JNJ
Johnson & Johnson
$4.522.56%62.95%24.68No
Merck & Co., Inc. stock logo
MRK
Merck & Co., Inc.
$2.762.52%45.92%18.44No
The Procter & Gamble Company stock logo
PG
Procter & Gamble
$3.652.40%63.26%26.23No
The Home Depot, Inc. stock logo
HD
Home Depot
$7.602.36%45.81%19.54No
McDonald's Co. stock logo
MCD
McDonald's
$6.082.23%76.57%34.43No
Caterpillar Inc. stock logo
CAT
Caterpillar
$4.802.09%34.86%16.73No
The Travelers Companies, Inc. stock logo
TRV
Travelers Companies
$3.721.99%27.19%13.72No
Walmart Inc. stock logo
WMT
Walmart
$2.241.53%69.14%45.92No
American Express stock logo
AXP
American Express
$2.081.34%20.90%15.49No
NIKE, Inc. stock logo
NKE
NIKE
$1.361.24%38.53%31.17No
UnitedHealth Group Incorporated stock logo
UNH
UnitedHealth Group
$6.601.21%32.32%26.83No
Microsoft Co. stock logo
MSFT
Microsoft
$2.721.10%29.31%26.66No
Visa Inc. stock logo
V
Visa
$1.800.86%25.75%29.91No
Apple Inc. stock logo
AAPL
Apple
$0.920.64%15.06%23.70No
The Boeing Company stock logo
BA
Boeing
$0.00N/A0.00%-12.57No
The Walt Disney Company stock logo
DIS
Walt Disney
$0.00N/A0.00%53.81No
How the Dogs of the Dow Strategy Works

Income-oriented investors can profit from this low-risk, high-reward strategy

The Dogs of the Dow refers to the 10 highest yielding stocks on the Dow Jones Industrial Average (DJIA). 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.

This strategy is similar to investing in an index fund, but is actually much simpler since it is truly a “set it and forget it” strategy. In this article, we’ll break down the Dogs of the Dow strategy so that you can see if it should have a place in your investment plan.

When it comes to an investing strategy, most investors will agree that simple is better. This is the appeal of investing in blue-chip stocks. These stocks are known to have slow, steady growth. And one way for any investor to invest in blue chip stocks is to invest in stocks that are listed on the Dow Jones Industrial Average (DJIA).

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. This strategy is known as the Dogs of the Dow strategy.

The Dogs of the Dow strategy has been around for decades but gained renewed interest among investors in 1991. That’s when author Michael B. O’Higgins wrote Beating the Dow. This book explained how if an investor chose the Dow’s 10 highest-yielding stocks they would have outperformed the broader Dow index for the majority of years leading up to the publication of the book.

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.

Although it’s hard to say for sure why the Dogs of the Dow strategy works, a common thought is that the companies that make up the Dogs will not alter their dividend strategy based on their stock price. This means that even when these companies are going through difficulties, they will maintain – and in many cases – increase their dividend.

To begin with, the Dow is one of the oldest and most closely followed stock exchanges in the world. The Dow Jones Industrial Average (DJIA) is an index of 30 blue chip stocks. The DJIA is intended to serve as a barometer for how the general economy is performing, and more specifically, how the stock market is performing.

The stocks selected for the DJIA are publicly traded stocks that list on either the New York Stock Exchange (NYSE) or the NASDAQ. The Dow stocks are chosen by the editors of the Wall Street Journal who use general guidelines. This means that the Dow components are generally large, respected companies that are responsible for significant economic activity in the global economy. The current Dow stocks include a number of names familiar to investors and non-investors alike such as Disney (NYSE:DIS), Coca-Cola (NYSE:KO), McDonald’s (NYSE:MCD) and Microsoft (NASDAQ:MSFT).   

Another reason why the DJIA is used for the Dogs of the Dow strategy is that every stock in the index pays a dividend. Many of the Dow components are considered dividend aristocrats. This exclusive club (as of June 2022, only 65 companies were dividend aristocrats) is composed of S&P 500 companies that have not only made a dividend payout a priority, but have also increased their dividend yield for at least 25 consecutive years. By definition, dividend aristocrats are required to meet certain market cap and liquidity requirements.

Here’s a list of the stocks that made up the Dogs of the Dow at the beginning of 2019:

THE 2019 DOGS OF THE DOW

 

Ticker

Name

Dividend Yield

1

IBM

International Business Machine

5.5%

2

XOM

Exxon Mobil Corporation

4.8%

3

VZ

Verizon Communications

4.3%

4

CVX

Chevron Corporation

4.1%

5

PFE

Pfizer

3.3%

6

KO

Coca-Cola Company

3.3%

7

JPM

JP Morgan Chase & Co.

3.3%

8

PG

Proctor & Gamble Company

3.1%

9

CSCO

Cisco Systems

3.0%

10

MRK

Merck &  Co.

2.9%

Now compare that to the list of stocks that made up the Dogs of the Dow at the end of 2021:

THE 2021 DOGS OF THE DOW

Name

Dividend Yield

Dow Inc.

4.94%

Verizon Communications

4.93%

International Business Machine

4.91%

Chevron Corporation

4.57%

Walgreen’s Boots Alliance

3.66%

Merck &  Co.

3.60%

Amgen

3.45%

3M

3.33%

Coca-Cola Company

2.84%

Intel

2.70%

While some of the stocks are the same, there are several new additions. That reflects the agnostic element of the Dows of the Dog. It’s simply a list of the 10 stocks with the highest dividend yield at that moment in time.

An investor who wants to practice the Dogs of the Dow strategy will find the 10 highest dividend-yielding stocks at the beginning of the calendar year. Many stock screening tools will provide investors with an updated list of the Dogs of the Dow.

Investors will then allocate an equal percentage of money to each of these stocks. After that they simply hold those stocks for the entire year and repeat the process at the beginning of the following year.

No investing strategy is successful 100% of the time and the Dogs of the Dow strategy is no different. There have been years that the DJIA index has outperformed the Dogs. For example, in 2008 and 2009 the Dogs of the Dow had greater losses than the broader index. But over time the Dogs of the Dow strategy has had an impressive track record.

In 2021, the Dogs beat the broader market posting a loss of 1.5% as opposed to a 6% loss for the DJIA. This was also the eight time in ten years that the Dogs beat the DJIA. To put that in monetary terms, an investor with $10,000 in the DJIA at the beginning of 2008 would have seen their account grow to $17,350 by the end of 2018. The same amount of money invested in the Dogs of the Dow would have grown to $21,420.

Although it’s hard to say exactly why any investing strategy works or does not work, the Dogs of the Dow strategy is based on the conventional wisdom that blue chip companies, such as those in the Dow will maintain a consistent dividend strategy that is independent of trading conditions. This means that the dividend, as opposed to a company’s current stock price, is the better measure of a company’s average worth.

Put another way, a company that has a high dividend relative to its stock price are considered to be at the bottom of their business cycle. This means that there is a higher likelihood that the stock price of these companies will rise faster than companies with low dividend yields. Therefore an investor who continually reinvests in high-dividend-yielding stocks should outperform the market on an annual basis.

There are a select group of mutual funds and exchange-traded funds (ETFs) that invest in the Dogs of the Dow components. The ELEMENTS Dogs of the Dow (NYSEARCA:DOD) ETF focuses on only the top paying dividend paying stocks in the DJIA on an annual basis. The fund reconstitutes itself annually to ensure that it is including only the top dividend payers.

However, most of these funds only hold a percentage of their assets in Dogs of the Dow components. Three options are listed below:

  • The Hennessy Balanced Fund (HBFBX) puts 50% of assets in the Dogs of the Dow and 50% in bonds.
  • The Hennessy Total Return (HDOGX) fund puts 75% of assets in the Dogs and 25% in bonds.
  • The ALPS Sector Dividend Dogs ETF (NYSEARCA:SDOG) starts with S&P 500 stocks and invests in the top dividend-paying names.

Because dividend yields are higher than the interest rate paid out by most bond funds, investing in a Dogs of the Dow mutual fund or ETF can be a more profitable alternative to bond funds. The risk of these funds is that these funds lack the diversity of other funds.

The Dows of the Dog strategy is a simple way to invest in dividend stocks that has been proven to beat the Dow index the majority of the time. The Dow is perhaps the most well-respected index in the world. And, because each of the 30 Dow components pays a dividend, they are some of the most important companies both in the United States and in the global economy.

The Dogs of the Dow strategy is a buy-and-hold strategy that is appropriate for investors who are looking to minimize their risk. Investors can execute a Dogs of the Dow strategy by rebalancing their portfolio on an annual basis. Or they can invest in a mutual fund or ETF that tracks the Dogs of the Dow.