Meet the 2018 Dogs of the Dow The Motley Fool

The company has been restructuring since 2017, casting off brands and products at breakneck speed. And it’s not done yet, announcing in its third-quarter report it “expects to offer a portfolio of approximately 200 master brands, an approximate 50% reduction from the current number . International Business Machines had a close of $160.29 on April 28, down 3.4% year-to-date. The stock is in correction territory, 12.3% below its postelection high of $182.79 set on Feb. 16.

That will make the Dogs of the Dow look a lot different than they did in 2017. With its perennial value focus, the Dogs always do well when hard-hit dividend stocks manage to bounce back more than their peers. In 2017, the way the entire market did so well simply proved too much for the Dogs to surpass. Has produced strong returns so far in 2017, rising 8% and setting new record-high power trend broker closes 20 times since the beginning of the year. Yet for those who had hoped to outperform the Dow by using a popular strategy that focuses on high-dividend Dow components, this year hasn’t been the best. The Dogs of the Dow are underperforming the broader market, and they’ve just barely managed to gain any ground at all as the year approaches the halfway point.

Chevron closed at $113.88 on March 1, down 3.2% year-to-date. The stock ended 2016 with a dividend yield of 3.67% and it’s now 3.79%, the second cheapest Dow stock, up from fourth place at the end of 2016. Cisco Systems closed at $34.44 on March 1, up 14% year-to-date.

Stocks Mentioned

The stock market is climbing, but this popular strategy is going nowhere. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. The Motley Fool recommends Chevron, Cisco Systems, Coca-Cola, and Verizon Communications. Which high dividend paying stocks would make the cut as one of demarker indicator formula the Dogs of the Dow today? If you would like to see how the highest dividend paying stocks of the Dogs of the Dow are doing, check out the official 2023 Dogs of the Dow, and track them with our Dogs of the Dow performance tables. Depending on the variation of the strategy, performance has been mixed in the last few years.

• Collectors were often targeted by thieves and bandits, so Dobermann used stray dogs for protection during his rounds.
• To view the Dow Jones Industrial Average live try Dow Jones Today.
• I still have a quarterly value level of 18,300, which expires at the end of March.
• That’s been good news for many investors, but it has left some who’ve sought out market-beating strategies shaking their heads and wishing they’d just bought an index-tracking investment instead.
• Cisco’s weekly chart is positive but overbought with the stock above its five-week modified moving average of $32.44, and above its 200-week simple moving average of $26.59.

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. While the Dogs of the Dow has been shown to outperform the Dow average in certain periods, it performed noticeably worse during the financial crisis. In 2008, the blue-chip gauge lost 33.8% compared to the Dogs which was down 41.6%.

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At the end of each year, investors look for opportunities and safe harbors to park their money for the year ahead. Investors who love dividends often consider the so-called Dogs of the Dow. This is the 10 highest yielding stocks in the Dow Jones Industrial Average . Dividend yield is a measure of how much a company pays in dividends compared to its stock price, expressed as a percentage. If a company maintains a steady or increasing dividend, which many blue chips do, the dividend yield rises as the stock price falls.

Unlike the Dogs of the Dow strategy, it significantly outperforms. In the world of investing, “alpha” is a word used to describe outperformance. A popular screen many investors use to search for outperformance candidates is called, “The Dogs of the Dow.” The grand result, unveiled in 1876, became known as the Doberman Pinscher—now considered one of the smartest, most athletic dogs on the planet.

The strategy requires identifying those stocks and buying them at the end of a calendar year. Then, in one year’s time, you repeat the process, selling stocks that no longer meet the threshold and replacing them with ones that do. The strategy entails building a portfolio of these stocks and reallocating it once a year. To see which Dow stocks would be one of the Dogs of the Dow today, try Current Doggishness.

General Electric is an unusual addition to the group, because it actually cut its dividend late in 2017. Yet the Dow stock’s losses during the year were even larger in percentage terms than the payout reduction, giving GE the No. 10 spot among the Dogs. Like the Dogs of the Dow strategy, this exercise gives you about 10 stocks per year.

Learn the basics of this simple dividend-investing strategy.

The stock ended 2016 with a dividend yield of 3.55%, and it’s now 3.74%. The stock ended 2016 with a dividend yield of 4.35% and it’s 4.69% now, still the cheapest of all Dow components. Investors looking to buy Coca Cola should do so on weakness to my monthly value level of $38.91. Investors looking to reduce positions should sell strength to $47.40, which is my quarterly risky level. The stock ended 2016 with a dividend yield of 3.65%, and it’s now 3.20%, which pushed the stock from the fifth cheapest to ninth place among the Dow 30.

You can also easily track the performance of this year’s Dogs of the Dow with our Daily Year-to-Date Performance Tables. Yet it’s interesting to see that 2017 looked a lot like 2019 in terms of how the overall market did. A 25% rise for the Dow proved impossible for the Dogs to keep up with, and Dogs investors had to settle for a 19% gain instead.

Investors looking to buy Cisco should do so on weakness to my quarterly value level of $29.45. I show annual, semiannual and monthly pivots of $32.53, $34.39 and $34.31, respectively. Investors looking to reduce holdings should reduce holdings on weekly closes below these pivots.

The Dogs of the Dow are 10 stocks chosen from the 30 companies in the Dow Jones Industrials. The way this simple strategy works is that at the beginning of the year, dividend investors looked at all 30 Dow stocks and picked the 10 that had the highest dividend yields. They then invested an equal amount of money in all 10 stocks, with the intent to hold them throughout 2017.

For this reason, Verizon has been a dog, in the technical meaning of the word, for at least a decade. But Verizon has quietly delivered a total average annual return of nearly 12% to investors over the past decade, though the stock appreciation portion has been lumpy. Growth is likely tepid as the telecoms are largely relegated to stealing share from each other, but the dividend is nothing to sneeze at, and likely safe too. When stock market indexes do extremely well, it can be tough for more conservative investing strategies to keep up. 2019 has been a tough year for the Dogs of the Dow strategy, which seeks to focus on top dividend stocks within the Dow Jones Industrials.

Yields Have Totally Collapsed: 7 ‘Strong Buy’ Stocks…

With the year drawing to a close, it’s almost certain that the Dogs of the Dow won’t be able to match up to the performance of the entire benchmark. Boeing closed at $184.83 on April 28, up 18.7% year-to-date and in bull market territory, 30.8% above its post-election low of $141.29 set on Nov. 8. The stock ended 2016 with a dividend yield of 3.65%, and it’s now 3.18%. The end of 2016 has brought a serious saxo bank forex broker change for the markets and for investors. It turns out that Donald Trump’s infrastructure and pro-growth initiatives have created a serious demand for industrial, infrastructure, consumer and growth stocks. The rise in Treasury yields has been massive, and that has put some pressure on some of the more defensive dividend stocks that have been a safe haven for investors over the past six years.

Yields Have Totally Collapsed: 7 ‘Strong Buy’ Stocks With Huge Dividends to…

That left investors optimistic about the prospects for the Dogs in 2017. The stocks that this popular strategy chose will produce gains, but they probably won’t be big enough to beat the Dow overall. The Dogs of the Dow aren’t living up to investors’ expectations, but the strategy still has some long-term advantages in terms of simplicity, volatility, and risk-adjusted return. Moreover, with more than six months left in 2017, the Dogs of the Dow have every opportunity to make up for lost time and emerge victorious this year.

Pfizer closed at $33.92 on April 28, up 4.4% year-to-date and is 13.2% above its postelection low of $29.96 set on Nov. 8. The stock ended 2016 with a dividend yield of 3.94%, and it’s now 3.83%. Coca Cola closed at $43.15 on April 28, up 4.1% year-to-date. The stock is 8.2% above its postelection low of $39.88 set on Dec. 12.

In addition to stock price and 2017 percent change, the current dividend yield is included for each Dow stock. Summary data (e.g. 2017 percent change and dividend yield) for the Dogs of the Dow, Small Dogs of the Dow, Dow 30, and Dow Jones Industrial Average are included below. To be notified the instant that the official Dogs of the Dow are revised, sign up to receive the free Dogs of the Dow Newsletter. On Dec. 31, start by pulling a list of the Dow 30 and rank each company according to its dividend yield. To obtain this list in just a few clicks, consider using a stock screener. The members of the Dow are well-established, blue chip companies.

Beware that the percent gain from the all-time intraday high of 21,169.11 to the 22,148 risky level is only 4.6%. I still have a quarterly value level of 18,300, which expires at the end of March. Stocks see their yields change over the course of a year, in part because of share-price moves and in part because of changes to dividend payments.

That leads to changes in the Dogs from year to year, as strong-performing stocks move out of the group and weaker performers cycle in. In 2017, great returns from Dow leaders Boeing and Caterpillar led to their graduating out of the Dogs, with Procter & Gamble and General Electric replacing them. All 30 components of the Dow pay dividends, and the blue chip companies that make up the average are among the biggest and most important businesses in the global economy. Verizon closed at $45.91 on April 28, down 14% year-to-date, and in correction territory, 16.3% below its postelection high of $54.83 set on Jan. 5. The stock ended 2016 with a dividend yield of 4.35% and it’s 5.11% now, by far the cheapest of all Dow components.

Then, among those higher quality names, it compares prices in a more universally applicable way . One inherent flaw in the screen is its use of dividends alone as a proxy for value. Dividends are fine if a company lacks compelling reinvestment opportunities. Yet upon closer inspection, the strategy appears all bark and no bite.

Depending on how the market performs, some stocks may remain a dog for a few years. One example is Verizon, which has appeared on the Dogs of the Dow each year since 2010. The company has only gained an average of 9.5% per year over that span. 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. The strategy is to focus on the dogs, with the idea being that they’re near the bottom of their business cycles and are poised to bounce back. To put this in context, earnings for 2020 were $0.52, down from $4.32 the prior year.

“While they have produced similar returns over that 12-year period, some individual years have seen quite a divergence in performance,” says Johnson. “In 2020, for example, the DJIA gained 7.2% while the Dogs suffered a loss of 12.7%. The Dogs also underperformed in 2021, when the Dogs generated a return of 16.3% versus 20.8% for the DJIA,” he continued. “The challenge with this methodology is it focuses on only 10 companies, which is not a very diverse portfolio,” says Joseph M. Favorito CFP® professional and managing partner at Landmark Wealth Management. “It doesn’t take into account the tax impact of possibly turning over your entire portfolio should you attempt this in a non-retirement account without a tax shelter,” Favorito says. “The underlying premise behind the strategy is mean reversion,” says Robert R. Johnson, professor of finance at the Heider College of Business at Creighton University. “The is based on the theory that stocks can be over or undervalued, but over the long run those that are undervalued will ‘revert to the mean,'” says Johnson.

If you’re ready to find an advisor who can help you achieve your financial goals, get started now. My market call is that the Dow can trade above 22,000 by the end of June, then there is risk to my annual value level of 15,111. Coming into this year, the Dogs of the Dow strategy had outperformed the broader average in six years out of the most recent seven.