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How to Succeed in the Markets Without Hardly Trying

Written by Christian DeHaemer
Posted June 6, 2023

It's June; we're almost halfway through the year. Pretty soon you’ll be dancing around and giving speeches like Bilbo Baggins on Midsummer's Eve. It’s time to take stock and figure out what the heck is going on in the market.

Today, I’m going to tell you about a simple, worry-free investment strategy that requires about 10 minutes of your time every six months.

It's called the Dogs of the Dow, and it has beaten the Dow Jones Industrial Average (DJIA) in the past five-, 10-, and 20-year periods.

What Are These Dogs?

The Dogs of the Dow is an investment strategy developed by Michael O’Higgins in 1991. Its method is simple. You take 10 of the Dow 30 stocks whose dividends are the highest percentage of their share price, divide your money equally, and invest in each one.

In the decade from 2010–2020, the Dogs returned an outstanding 17.7% annually compared with 14.5% returns from the Vanguard 500 Index or the 13% you would have gotten from Fidelity Magellan — and there are no fees!

Small Dogs

This method and the more refined “Small Dogs of the Dow” have beaten the DJIA and the S&P 500 over the long haul.

The Small Dogs are composed of the top five instead of the top 10 dividend-yielding stocks in the Dow Jones Industrial Average.

From 2000–2020, the Dogs of the Dow had an average annual total return of 10.8%, while the Small Dogs of the Dow did even better with an average annual total return of 12.5%. 

Both of these numbers are noticeably better than the Dow Jones Industrial Average at 8.4% and the S&P 500 at 7.7% over the past 20 years.

The thinking behind the Dogs of the Dow theory is that it puts you in undervalued stocks. They are blue chips, so it is unlikely that they are going to go bankrupt, plus they pay a high dividend so management has confidence in the future.

The Dogs in June 2023

Here is the current list of Dogs, followed by their respective dividend yields:

  1. Verizon Communications (NYSE: VZ) — 7.5%
  2. Walgreens Boots Alliance (NASDAQ: WBA) 6.33%
  3. 3M (NYSE: MMM) 6.02%
  4. Dow Inc. (NYSE: DOW) 5.38%
  5. International Business Machines (NYSE: IBM) 5.00%
  6. Pfizer (NYSE: PFE) 4.23%
  7. Chevron (NYSE: CVX) 3.86%
  8. Exxon Mobil (NYSE: XOM) 3.44%
  9. Cisco Systems (NASDAQ: CSCO) 3.10%
  10. Goldman Sachs Group (NYSE: GS) 3.10%

Despite the long-term value of this strategy, the Dogs had a bad start to 2023 with only Intel and JP Morgan up in value while the other 10 were down. This is mostly because this is a value strategy and we are in an age of momentum.

It does wake up the contrarian in me. As Benjamin Graham purportedly said, “In the short run, the market is a voting machine, but in the long run, the market is a weighing machine.”

If you want to sleep at night and still beat the market without paying fees or doing any research, the Dogs of the Dow are for you. Just remember to change them again next year.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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