Sunday, May 01, 2016

Dogs Of The Dow Outpacing Broader Market

This year's performance of the Dogs of the Dow is indicative of investor interest in dividend paying stocks. The Dogs of the Dow strategy is one where investors select the ten stocks that have the highest dividend yield from the stocks in the Dow Jones Industrial Index (DJIA) after the close of business on the last trading day of the year. Once the ten stocks are determined, an investor invests an equal dollar amount in each of the ten stocks and holds them for the entire next year.

As can be seen in the below table, the average return of this year's Dogs of the Dow is 8.9% versus the Dow Jones Industrial Average ETF return of 2.8% and the S&P 500 Index ETF return of 1.7% through April 29, 2016. Particular strength is being seen in the energy and industrial Dow Dogs this year. Much of the year has yet to unfold; however, Intel's (INTC) current yield of 3.43% (yield of 2.79% at year end 2015) would qualify it as a Dog of the Dow at the moment. Year to date Intel's stock price has declined 12.1%. Intel would replace Wal-Mart (WMT) where WMT's current yield is 2.99%.

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