It’s time to buy into the Dogs of the Dow theory again… that time of year when investors buy the 10 Dow stocks with the highest dividend yields, cash out by the next year’s end, and repeating.
And the theory in practice isn’t too shabby…
Dogs of the Dow Track Record:
-
In 1996, they were up 29%.
-
In 1997, they were up 22%.
-
In 1998, they ran up 11%
-
And in 1999, they ran up another 4%
-
In 2000, they were up 6.4%.
-
In 2001, they were down 5% and down another 9% in 2002, both of which still outperformed the major indices in tough market times.
-
And despite the bear market of 2000 to 2002, Dogs of the Dow raced 29% higher in 2003.
-
By 2004, they ran up 4.4%, giving back 5% by 2005.
-
By 2006, Dogs of the Dow ran up 30.3%.
-
In 2007, the Dogs came in with flat returns.
-
In 2008, they fell 38.8% as compared to the Dow’s 31.9% loss.
-
In 2009, they flew 16.9% higher as compared to the Dow’s 22.7% rise.
-
For 2010, so far the Dogs are up about 14% vs. a 10% rise in the Dow.
Here’s the logic.
The Dow holds 30 big, blue chips. When you buy these stocks with the highest yields, you’re buying the high quality companies that are out of favor on Wall Street… making them bargains.
To profit well from the theory, invest in equal amount in each of the 10 stocks.
The 2010 Dogs of the Dow included:
-
AT&T Inc. (T)
-
Verizon (VZ)
-
DuPont (DD)
-
Pfizer (PFE)
-
Kraft Foods (KFT)
-
Merck (MRK)
-
Chevron (CVX)
-
McDonald’s (MCD)
-
Home Depot (HD)
-
Boeing (BA)
As for 2011, here’s the most likely list:
-
AT&T (T) with a 5.84% yield
-
Verizon (VZ) with a 5.72% yield
-
Merck (MRK) with a 4.21% yield
-
Pfizer (PFE) with a 4.19% yield
- Kraft (KFT) with a 3.76% yield
-
Johnson & Johnson (JNJ) with a 3.49% yield
-
DuPont (DD) with a 3.38% yield
-
Intel (INTC) with a 3.35% yield
-
Chevron (CVX) with a 3.26% yield
-
And General Electric (GE) with a 3.18% yield
Remember, if you play this theory, invest an equal amount in each of the Dogs. Best of luck.
