Dogs Of The Dow And A 3 Top Dogs Strategy

The “Dogs of the Dow” is one of the simplest, most well-known dividend strategies on Wall Street. And investors who choose to jump in during 2019 will be shooting for their fifth straight year of market-beating returns.

The strategy involves buying the 10 highest-yielding stocks in the 30-component Dow Jones Industrial Average at the start of the year. The idea is that when you buy blue-chip stocks, high relative yields are actually signal value. These firms may just be at the weakest part of their business cycles — and ready to snap back.

Blue chips are rarely cheap, so when there’s a chance to jump in at a value, investors want to jump in. Not only do you enjoy yields on these stocks that are higher than usual, but you get the upside of outsized gains as the stocks rebound. The 2019 Dogs of the Dow:

  1. Merck & Co. (MRK): 2.9% yield
  2. Cisco Systems (CSCO): 3.0% yield
  3. Procter & Gamble (PG): 3.1% yield
  4. JPMorgan Chase (JPM): 3.2% yield
  5. Coca-Cola (KO): 3.3% yield
  6. Pfizer (PFE): 3.3% yield
  7. Chevron (CVX): 4.0% yield
  8. Verizon (VZ): 4.1% yield
  9. ExxonMobil (XOM): 4.6% yield
  10. International Business Machines (IBM): 5.2% yield

The strategy has yielded an annual total return of 9.5% since 2001, compared to 7.3% for the S&P 500. Last year didn’t look all that great, with a 1.5% loss, but it beat out 3.5% and 4.4% losses for the Dow and S&P 500, respectively (all those figures include dividends).

That was good enough for the strategy’s fourth consecutive year topping the broader market. But we did even better; by selecting the creme de la creme — three of last year’s Dividend Dogs — we generated an average total return of positive 8.8%.

Let’s dig into the Dogs that really stand out.

ExxonMobil

Oil had a wretched 2018. The U.S. benchmark West Texas Intermediate Crude steadily climbed from about $60 per barrel at the start of 2018 to $76 in early October before plunging to a year-end close around $45.

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Brett Owens is the Chief Investment Strategist, BNK Invest, Inc. Subscribe to Brett Owens's Contrarian Outlook

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