Dogs Of The Dow 2021

Dogs of the Dow

The Dogs of the Dow is an investing strategy that is by now fairly well-known to many small investors. The list is published annually by the Dogs of the Dow website. The 10 stocks from the Dow 30 that have the highest yield on the last day of the year comprise the Dogs for the Dow for the following year. Before we dive into the list of the Dogs of the Dow in 2021 lets first look at some history of the Dow 30 and the Dogs of the Dow.

History of the Dow 30

First some history on the Dow Jones Industrial Average, which is also referred to as the Dow 30 before we discuss why it is changing. The Dow Jones 30 refers to an index of 30 blue-chip stocks that was created by Wall Street Journal editor Charles Dow in 1896. It is the second oldest index after the Dow Jones Transportation Average. The name is derived from Charles Dow and his business partner Edward Jones. 

The index was created to track the market performance of leading industrial stocks in an era when information flow was limited. Initially, there were 12 industrial companies in the index. These were the largest industrial companies at the time and included companies in sugar, tobacco, oil, and rubber industries. The 12 companies in the original Dow Jones Industrial Averages were American Cotton Oil, American Tobacco, American Sugar, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather, and U.S Rubber.

In 1916 the number of stocks in the index was increased to 20. In 1928 the index was expanded to 30 stocks, which is the number today. Although the index was initially comprised of industrial stocks, the index later added non-industrial or service stocks. In fact, today, technology, financial services, and healthcare sectors have a large representation in the Dow 30.

The index is price weighted, which is unlike most other indices that are weighted by market capitalization. This means that stocks with higher share prices are given greater weight in the index. It is calculated as the sum of the prices of all 30 companies divided by a factor. The factor, which is referred to as the Dow Divisor is adjusted for stock splits, dividends, spin offs, and additions or deletion to the Dow 30. The Dow Divisor is calculated by The Wall Street Journal. The Dow Divisor formula attempts to maintain continuity in the index value after changes. The current value of the Dow Divisor is roughly 0.147.

Today, the Dow Jones Industrial Average is chosen by committee. The index is maintained by the S&P Dow Jones Indices, which is majority owned by S&P Global. The index does not include transportation and utilities, which have their own indices. The stock selection criteria are not complete transparent. Reportedly, to be considered for the Dow 30, a company must meet the following criteria:

  • Be in the S&P 500 Index
  • Must be incorporated and headquartered in the U.S.
  • Generate the majority of its revenue from the U.S.
  • Help make the Dow representative of the overall U.S. economy
  • Attract a large number of investors
  • Demonstrate sustained growth
  • Have an excellent reputation

That said, stocks can be removed from the Dow 30 and later reinstated. For example, Chevron (CVX) was in the Dow 30 from 1930 to 1999 when it was removed. The stock was added back in 2008. Similarly, Honeywell (HON) was removed in 2008 and added back in 2020. You can look at the list of addition and deletions in the Dow 30 since 1929. There is no set time period for additions or deletions. Changes are made as needed. The Dow Jones 30 was lasted changed on August 31, 2020 when Exxon Mobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX) were removed and Salesforce (CRM), Honeywell International, and Amgen (AMGN) were added.

Stocks in the Dow 30

The current stocks in the Dow 30 are listed below. This list is up to date as of January 6, 2021. Note that Salesforce (CRM) does not pay a dividend. Both Disney (DIS) and Boeing (BA) have suspended their dividends. You can check the coronavirus dividend cuts and suspensions list.

Name Ticker Market Capitalization (millions) P/E Ratio Dividend Yield
APPLE INC. AAPL  $       2,227,406  40.10 0.63%
AMGEN INC. AMGN  $          132,595  18.37 3.09%
AMERICAN EXPRESS COMPANY AXP  $             95,553  29.32 1.45%
THE BOEING COMPANY BA  $          119,471  0.00 0.00%
CATERPILLAR INC. CAT  $             99,764  30.53 2.24%
SALESFORCE.COM, INC. CRM  $          202,691  57.77 0.00%
CISCO SYSTEMS, INC. CSCO  $          185,838  17.86 3.27%
CHEVRON CORPORATION CVX  $          167,479  0.00 5.93%
THE WALT DISNEY COMPANY DIS  $          323,063  0.00 0.00%
Dow Inc. DOW  $             41,390  0.00 5.02%
THE GOLDMAN SACHS GROUP, INC. GS  $             93,218  15.63 1.85%
THE HOME DEPOT, INC. HD  $          286,430  22.99 2.26%
HONEYWELL INTERNATIONAL INC. HON  $          146,273  30.98 1.78%
INTERNATIONAL BUSINESS MACHINES CORPORATION IBM  $          112,398  14.07 5.17%
INTEL CORPORATION INTC  $          207,400  9.92 2.61%
JOHNSON & JOHNSON JNJ  $          416,837  25.34 2.55%
JPMORGAN CHASE & CO. JPM  $          383,007  16.41 2.87%
THE COCA-COLA COMPANY KO  $          224,240  27.06 3.14%
MCDONALD’S CORPORATION MCD  $          157,576  32.28 2.44%
3M COMPANY MMM  $             98,971  20.11 3.43%
MERCK & CO., INC. MRK  $          205,186  17.84 3.21%
MICROSOFT CORPORATION MSFT  $       1,647,432  35.15 1.03%
NIKE, INC. NKE  $          221,707  80.63 0.78%
THE PROCTER & GAMBLE COMPANY PG  $          342,513  26.52 2.28%
The Travelers Companies, Inc. TRV  $             34,078  15.40 2.53%
UNITEDHEALTH GROUP INCORPORATED UNH  $          327,153  19.81 1.45%
VISA INC. V  $          501,369  47.20 0.60%
VERIZON COMMUNICATIONS INC. VZ  $          242,410  13.25 4.28%
WALGREENS BOOTS ALLIANCE, INC. WBA  $             35,558  83.31 4.54%
WALMART INC. WMT  $          412,368  21.04 1.48%
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