The Dogs of the Dow strategy says to simply buy the 10 Dow stocks with the highest dividend yields at the start of each year. So far in 2010, the "Dogs" strategy has done very well, outperforming the index itself as well as the average performance of all stocks in the index. Below is a table showing all 30 Dow stocks sorted by their dividend yields at the start of the year. The ten "Dogs" are highlighted in blue. As shown, the average YTD performance of the 10 "Dogs" is currently 13.10%. The average YTD performance of all Dow stocks is 6.64%, and the index itself is currently up 8.73%. The 20 non-dog stocks are only up an average of 3.41%, and the 10 stocks with the lowest yields are actually down 4.97%.
The color coding clearly shows the underperformance of low yielding stocks in the Dow this year. Alcoa (AA), Hewlett-Packard (HPQ), JP Morgan (JPM), Bank of America (BAC) and Cisco (CSCO) are the five stocks that started the year with the lowest dividend yields. Alcoa is down 12.22%, HPQ is down 17.89%, JPM is down 5.35%, BAC is down 22.17%, and CSCO is down 19.19%.
For those wondering, below are the ten stocks that would be the 2011 Dogs of the Dow if the year ended today. Intel (INTC) and Johnson & Johnson (JNJ) would be new to the list, replacing Home Depot (HD) and Boeing (BA). Yes, tech stock Intel is now one of the highest yielding stocks in the Dow!
Be sure to check back at the end of the year for an updated list.