Financials Matter

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Dogs of the Dow…Winning in Bad Markets

One of the oldest – and most consistent – investment strategies over time is affectionally referred to as “The Dogs of the Dow.”

It consists of buying ten of the DOW 30 stocks that have underperformed the market and have the highest yield among their peers.

Sounds simple enough, right?

Hold on.

First of all, you need to understand that your investment must be evenly spread among the 10 Dogs.

Example:  If you invest $30,000, then you need to have $3,000 in each stock.

Second, you want to avoid over-weighting any sector.

Third, consider the dividend yield and the ability of the company to maintain and/or increase their dividends every year.

Translation:  Make sure the company is earning more than they pay out in dividends.

This strategy also offers downside protection.

2018 was a classic example.

The DOW 30 was down nearly 6% while the “Dogs of the Dow was only down 1.5%. *

*(Note: GE was one of the dogs and lost over 57% of its value in 2018 otherwise the “Dogs” would’ve been positive for the year).

So, even if one of your dogs gets blown up – which rarely happens – you can still beat the market averages.

In fact, look at the track record of The Dogs vs. the DJIA and S&P for the last 10 years:

Dogs annualized return = 18.1%

S&P 500 annualized return = 14.7%

DJIA annualized return = 15.1%

We remind you that nothing is guaranteed in the stock market, except change, of course.

However, time tested strategies like the Dogs is a strategy you should consider with some of your money.

See the 10 “Dog” stocks we currently “suggest” you consider buying (HERE).


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