By: Ian Cooper
It’s time to think about New Year strategies, including the Dogs of the Dow.
With the Dogs of the Dow, you’re simply buying the highest yielding 10 Dow Jones stocks that fell out of favor, investing an equal amount in each, liquidating by January 1 of the following year, and repeating for nearly predictable rewards.
Even better, it's easy to use, and it performs well.
The way you pick the Dogs is very simple.
When the year starts, look at the top 10 yielding dividend stocks in the Industrials. Invest equal amounts of money in all 10 stocks. Then, hold onto those stocks throughout the year. At the end of the year, we do it all over again.
While some, including Barron’s once reported that the “Dogs of Dow Investing Strategy no Longer Works,” that’ not true. Others have noted that research confirmed back in 2007 that the Dogs of the Dow is no longer a successful concept.
And still others argue investors are barking up the wrong tree with the theory.
While 2007 was flat, followed by a 38.8% decline in the Dogs for apparent subprime reasons, the Dogs have returned a gain every year since.
In fact, in 2009, they were up 16.9%. In 2010, they jumped 20.5%.
In 2011, there were up 16.3%. In 2012, they jumped 9.9%. In 2013, they returned 34.9%. In 2014, they returned 10.8%
In 2015, they did okay, returning just 2.6%.
In 2016, the Dogs returned 16% on average. So, the idea that the theory is dead is laughable.
In 2017, the Dogs of the Dow returned 19% for the year. For 2018, the Dogs lost about 4%, but still outperformed volatile markets.
For 2019, some of the Top Dogs to buy and hold, include:
International Business Machines IBM , which has a yield of 5.56%. It was all downhill for IBM in 2018. After starting the year at nearly $165, the stock fell apart in the tech rout to a recent low of $113. The last time IBM was at this price was early 2016.
Exxon Mobil Corporation XOM , which has a yield of 4.81%. After staring the year at $86, plunging oil prices took a hatchet to the stock. It now trades at $68 a share.
Verizon Communications VZ , which has a yield of 4.36%. VZ didn’t have such a bad year. It Started 2018 around $50 and ran to nearly $68 in November 2018. The latest pullback to $52 a share appears to be overdone at this point.
Chevron Corporation CVX , which has a yield of 4.2%. After staring the year around $128, plunging oil prices took a hatchet to the stock. It now trades $108 a share.
And Coca-Cola KO , which has a yield of 3.31%. KO didn’t have a bad year either. After starting out at $44 in January 2018, the stock pushed as high as $50 before pulling back with the broader market.
These are just some of the Dogs of the Dow to be aware of for 2019.