2014 Dogs of the Dow: A Preliminary Look:
The K.I.S.S. principle worked in 2010, 2011, 2012, and 2013. How about 2014? At the beginning of every year a lot of fuss is always made over the “Dogs of the Dow” strategy.
While some market know-it-alls have completely discounted the Dogs strategy as a myth, there is NO discounting the fact that this strategy is widely followed and has worked beautifully over the past four years. In an age where investment products and strategies have become more complex than ever before, is it surprising that many investors are opting for strategies that are simpler?
o The Dogs of the Dow is one of the simplest strategies around: At the start of the year, investors purchase an equal-weighted basket of the 10 highest yielding Dow Jones (DJIA) stocks. The basket is rebalanced at the beginning of each year with the new set of high yielders.
So far, the Dogs strategy delivered gains of 26.8% in 2013. After adjusting for dividends, the strategy has so far delivered returns of 30.2%, compared with a 23.3% increase for all DJIA components.
According to some market watchers, a successful Dogs strategy
requires investors to take advantage of the January effect. Historically, the Dogs have outperformed the boarder DJIA by more than 1.5% in the month of January alone.
Here’s a preliminary look at the 2014 Dogs of the Dow, listed by yield (as of December 5, 2013) –
if the Dog portfolio were constructed today, the yield cutoff would be 3.0%:
• AT&T Inc. (T) – 5.3%; Verizon Communications (VZ) – 4.3%; Intel (INTC) – 3.7%; Merck & Co. (MRK) – 3.6%; McDonald’s (MCD) – 3.4%; Cisco Systems (CSCO) – 3.3%; Chevron (CVX) – 3.3%; Pfizer (PFE) – 3.1%; DuPont (DD) – 3.0%; and Microsoft (MSFT) – 3.0%