E All The Dogs!

Dogs of the Dow is an investment strategy that targets the ten top-yielding stocks in the Dow Jones Industrial Average (DJIA) for investment each year. Popularized by Michael B. O'Higgins in his 1991 book, Beating the Dow, this simple strategy frequently outperforms the DJIA and seems to outperform the index over longer periods of time. The strategy is based on the idea that blue-chip companies pay consistent (and increasing) dividends, while their stock prices fluctuate based market conditions. So, if the dividend yield is higher than usual, the stock price likely is lower than usual. Investors following this strategy should reap the benefits of higher yields and above-average stock-price gains. I don't actively follow the Dogs of the Dow strategy, but I happen to own all the dogs in my DivGro Portfolio.

The Dow Stocks

Dow refers to the Dow Jones Industrial Average, a stock market index created by Charles Dow and named after Dow and one of his business associates, statistician Edward Jones. The index indicates the value of thirty large, publicly owned companies based in the United States. 

The value of the Dow is the sum of the price of one share of stock for each component company, corrected by a factor that is adjusted whenever one of the component stocks split or pays a dividend. The price-weighted approach of determining the index is problematic, as evidenced this week by the significant impact of just one stock's woes on the index. Boeing (BA) shares closed at $422.60 per share last Friday, March 8, before concerns over the second Boeing 737 crash within five months last Sunday caused the stock to tumble to below $380. For reference, the next highest per share price of a Dow stock is UnitedHealth Group (UNH), which is trading near $250. Despite these issues, the index remains popular and it provides a snapshot of some of the most influential businesses in the world. 

As mentioned earlier, the Dogs of the Dow strategy looks to invest in the top-yielding Dow stocks. To identify the 2019 Dogs of the Dow, let's look at a dividend yield chart of the Dow's component stocks, as of 1 January 2019:

In the chart, the ten Dow stocks with the highest yields on 1 January 2019 are colored green.

The 2019 Dogs of the Dow

Below is a table of the 2019 Dogs of the Dow. The table shows the dividend yields of these stocks on 1 January 2019 (qualifying yield) as well as the year to date (YTD) performance and the current yield of each stock.

qualifying yield: 5.52%
performance YTD: +21.65%
current yield: 4.65%

ExxonMobil (XOM )
qualifying yield: 4.81%
performance YTD: +17.32%
current yield: 4.15%

Verizon (VZ )
qualifying yield: 4.29%
performance YTD: +2.15%
current yield: 4.26%

Chevron (CVX )
qualifying yield: 4.12%
performance YTD: +13.89%
current yield: 3.91%

Pfizer (PFE)
qualifying yield: 3.30%
performance YTD: –4.40%
current yield: 3.52%
Coca-Cola (PFE )
qualifying yield: 3.29%
performance YTD: –2.75%
current yield: 3.57%
JPMorgan Chase (JPM )
qualifying yield: 3.28%
performance YTD: +6.58%
current yield: 3.11%

Procter & Gamble (PG )
qualifying yield: 3.12%
performance YTD: +8.84%
current yield: 2.92%

Cisco Systems (CSCO )
qualifying yield: 3.05%
performance YTD: +20.36%
current yield: 2.74%

Merck (MRK)
qualifying yield: 2.88%
performance YTD: +6.31%
current yield: 2.76%
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Disclaimer: I'm not an investment professional or a licensed financial advisor. This blog represents my personal views and decisions, which ...

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