What Are Dogs of the Dow?
According to investopedia, Dogs of the Dow is an investment strategy that attempts to beat the Dow Jones Industrial Average (DJIA) each year by optimizing towards high-yield investments.
The general concept is to allocate money to the 10 highest dividend-yielding, blue-chip stocks among the 30 components of the DJIA.
The strategy requires re-balancing at the beginning of each calendar year.
Dogs of the Dow relies on the premise that blue-chip companies do not alter their dividend to reflect trading conditions and, therefore, the dividend is a measure of the average worth of the company. In contrast, the stock price does fluctuate throughout the business cycle.
How the Dogs of the Dow Strategy Works?
The idea is to make stock picking somewhat easy and relatively safe, the latter because the universe is limited to blue-chip stocks. As a tactic, Dogs of the Dow goes like this: After the stock market closes on the last day of the year, select the 10-highest dividend-yielding stocks in the DJIA. Then, on the first trading day of the new year, invest an equal dollar amount in each of them. Hold the portfolio for a year, then repeat the process at the beginning of each subsequent year.
The following table above lists the ten highest yielding Dow stocks as of the close on December 31, 2020. They are the official 2021 Dogs of the Dow. Of these ten Dow stocks, the five stocks with the lowest closing price are the 2021 Small Dogs of the Dow.