Category Archives: Dogs of the Dow

2020 Dogs of the Dow

Below is the Dogs of the Dow for 2020 with the breakdown of the other categories that we track.

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2019 Dogs of the Dow

Below is a chart of the performance of the Dogs of the Dow from December 31, 2018 to December 31, 2019.

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In 2019, the Dogs of the Dow (high yield) failed to exceed the performance of the Dow Jones Industrial Average.  In addition, the Dogs of the Dow (high yield) severely underperformed the low yield stocks by a margin of +15%.

Our commentary from the January 2019 Dogs of the Dow watch list had the following to say:

“Our preference is for stocks in the highest p/e or lowest yield stocks.”

While the top 3 stocks in the high p/e category underperformed the Dow Jones Industrial Average with a gain of +13.54%, the low yield group crushed the index with gains of +36.71% and +32.36%.

1996-2019 Long-Term Performance

Below is our long-term performance of the Dogs of the Dow from 1996 to 2019 for both the top ten and top 3 stocks for the respective categories.

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As is the case, the Dogs of the Dow (high yield) underperform the DJIA and the low yield category.  High P/E stocks seem to win the day with above average gains on a long term basis.  This is counter to the belief that investors should buy low p/e stocks.

see also:

Dogs of the Dow: September 2019

Below we list the performance of the various categories of Dow Jones Industrial Average stocks as compared to the index.

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The category highlighted in red is the original “Dogs of the Dow” where the ten highest yielding stocks are bought and held for one year and sold at the end of the year.  So far, the Dow is beating the Dogs of the Dow by almost 5%.

When contrasting the performance of the Dogs of the Dow against taking the opposite category, stocks providing the lowest dividend yield, we see that across all groupings, the Dogs of the Dow consistently underperform.

For each group, the data set that is thought to be “bad” generally outperformed the category that typically is thought to be “good.”  For example, the highest p/e stock bet lowest p/e stocks, lowest yield stocks beat highest yield stocks and highest p/b stocks beat out lowest p/b stocks (except top 2,3,4) .

Worth noting is the fact that the top 2,3,4 group of stocks only outperformed the top 1,2,3 group of stocks in both of the p/e categories.  This is a stark contrast to what we indicated occurred in prior years of data.

Did BusinessWeek Really Say That?

In a recent article, Bloomberg BusinessWeek referred to their “The Death of Equities” article that was published on August 13, 1979.

Bloomberg owned up to an article that they didn’t have much to do with and used it as a point of reference for the market’s change since 1979.  It seems that very often, bad calls are buried when they can be used as lessons.  Good job Bloomberg BusinessWeek.

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What stood out to us about the article is the reference to the performance of the Dow Jones Industrial Average at +9,000% compared to the S&P 500 Index at +7,000%.  Many contend that the Dow Jones Industrial Average is an outdated index and that the S&P 500 is “better” because of the broader diversification being representative of the U.S. economy.

Our view has always been, go with the index that has the longest history of data.  In this case, the Dow Jones Industrial Average has published record of data going back to 1896 while the S&P 500 goes back to 1957. Also, greater concentration does better than broad diversification when selecting within the “blue chip” category of stocks.

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Dogs of the Dow: July 2019

On January 1, 2019, we posted our list of the “Dogs of the Dow”.  In that list we broke down all the categories that we track.  Our closing remark was as followings:

“Our preference is for stocks in the highest p/e or lowest yield stocks.”

Our preference is based on evidence going back to 1996, which shows that low yielding stocks don’t outperform the index which is contrary to Michael O’Higgins book Dogs of the Dow,which claims that the way to beat the index is to invest in the ten highest yielding stocks at the beginning of each year. 

Additionally, the data has demonstrated that stocks with the highest p/e or lowest yield generally beat the index and crush the highest yielding stocks.  Below, we list the performance of the various categories of Dow Jones Industrial Average stocks as compared to the index.

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So far,  the best performing category of stocks among the top ten, which is the best relative comparison to the top ten highest yielding stocks, is the lowest yielding stocks with a gain of +23.95%.  This gain exceeds the top ten highest yielding stocks by nearly 100%.

Not to be outdone, the ten highest p/e stocks gained +21.70% as compared to the ten highest yielding stocks with a gain of +12.42%. 

The changes related to DowDuPont (DWDP) has had a material impact on the data and has been excluded from the categories of the “ten highest p/e”, “ten lowest p/b”, and the “lowest 2,3,4: lowest p/b”. 

If the next best stock were added to the “ten highest p/e” category it would have increased the return to +22.92%, the “ten lowest p/b” group would have seen a reduction from +14.35% to +13.16% while adding CVX to the “lowest 2,3,4: lowest p/b” reduced the category performance.  

Below is the individual breakdown of the stocks and their performance. The data is as of July 5, 2019. Continue reading

2019 Dogs of the Dow

Below is the Dogs of the Dow for 2019 with the breakdown of the other categories that we track. Continue reading

2018 Dogs of the Dow

Below is a chart of the performance of the Dogs of the Dow from January 2, 2018 to December 31, 2018.

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The top ten highest yielding stocks are the traditional Dogs of the Dow.  For the year 2018, the highest yielding stocks beat the Dow with a loss of –3.52% compared to the Dow’s decline of –5.34%.

Ten Highest Yielding Stocks Compared to the Dow 1996-2018

year Dogs of Dow DJIA
2018 -3.52% -5.34%
2017 19.45% 25.10%
2016 16.10% 13.40%
2015 -1.20% -2.20%
2014 7.00% 7.50%
2013 30.30% 26.50%
2012 5.70% 7.30%
2011 12.20% 5.50%
2010 15.50% 11.00%
2009 12.90% 18.80%
2008 -41.60% -33.80%
2007 -1.40% 6.40%
2006 24.80% 16.30%
2005 -8.90% 0.60%
2004 0.50% 3.10%
2003 23.60% 25.30%
2002 -12.20% -16.80%
2001 -7.80% -7.10%
2000 2.70% -6.20%
1999 1.10% 25.20%
1998 7.80% 16.10%
1997 17.30% 22.60%
1996 24.50% 26.00%

Noteworthy Stats

  • Our selection of the top 1,2,3 highest p/e stocks of the Dow on January 2, 2018 gained +6.54%.
  • The best performing group was the top 2,3,4 of the highest p/e stocks with a gain of +18.24%.
  • The worst performing group was the top 1,2,3 of the highest yielding stocks with a loss of –25.44%.

Analysis Review

Dogs of the Dow: December 2018

The results for our Dogs of the Dow for 2018 are almost in.  In this posting, we will summarize our findings of the data that we analyzed on the Dogs of the Dow from 1996 to 2017.  We will demonstrate our “skin in the game” by checking the performance of the stocks that we actually bought based on our assessment.  Finally, you get to see the data we used and correct us on our errors. Continue reading

Dogs of the Dow

According to Wikipedia, the Dogs of the Dow, “…is an investment strategy popularized by Michael B. O'Higgins in 1991, which proposes that an investor annually select for investment the ten Dow Jones Industrial Average (DJIA) stocks whose dividend is the highest fraction of their price [highest dividend yield].”

So far, in the year 2018, the ten highest yielding stocks have gained +1.10% while the ten lowest yielding stocks have gained +13.67%, on average.  In the same period of time, the Dow Jones Industrial Average has gained +2.34%.

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The distinction between the highest yielding stocks as compared to the lowest yielding stocks is very important because the whole purpose of the theory by Micheal O’Higgins is that you’ll be able to consistently beat the Dow Jones Industrial Average if you choose the ten highest yielding stocks every year.

As our January 6, 2018 posting on the top shows, in the period from 1996 to 2017, the “Dogs” (highest yielding stocks) routinely underperformed the DJIA annually.  Because most investors are not in the position to buy ten stocks at the beginning of each year, we have provided performance data on the first three stocks (1,2,3) and the next best stocks (2,3,4).

There are several conclusions that should be drawn from the commentary above:

  • High yield equals high risk, even among blue chip category.
  • Fewer stocks means greater volatility.
  • Low yield DJIA stocks track momentum performance, exceptional reward with exceptional risk.
  • If you want “average” performance buy the index fund.
  • If you want exceptional return with more risk, buy the 2nd, 3th and 4th ranked stocks among the high p/e or low yield stocks.

Dogs of the Dow

Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to July 30, 2018 (GE is no longer a constituent).

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As expected, General Electric (GE) was dropped from the Dow Jones Industrial Average and replaced by Walgreen’s Boots Alliance (WBA).  However, for the sake of tracking the actual performance of the Dogs of the Dow, we will keep GE on the board until year end to get accurate performance data on the theory for selecting stocks.

Dogs of the Dow

Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to June 8, 2018 (intraday).

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Dogs of the Dow

Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to May 8, 2018 (intraday).

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Our examination of the Dogs of the Dow concept has upended our prior thinking on how to approach this investment strategy.  As we’ve seen, the original Dogs of the Dow has continued to prove an unfortunate investing process.  In addition, the data below shows that there is much to be learned on the road to beating the index.

Dogs of the Dow

On March 20, 2018, we posted the performance of the top three Dow Jones Industrial Average stocks in various fundamental categories.  Below is the emerging theme that has cropped up in recent work.

DJIA Update: March 2018

Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to March 19, 2018.

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The Dogs of the Dow continue to underperform the Dow Jones Industrial Average by a considerable margin.

DJIA Update: February 2018

Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to February 21, 2018.

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The latest update on the performance of the respective categories demonstrates, in part, the quality of analysis that we provided on the Dogs of the Dow investment theory.