Dogs of the Dow

Dogs of the Dow.

Use dividend yield to select out of favor stocks

Dogs of the Dow is a contrarian strategy based on selecting the ten most out of favor stocks, based on stock dividend yield, in the Dow Jones Industrial Average. You hold these high-yield Dow dogs for a year and then repeat the process by selecting ten new dogs.

The strategy was first popularized by Michael O’ Higgins in his book, "Beating the Dow," published in 1991. O’Higgins showed that over the 17-year period from 1973 to 1989, his Dogs strategy averaged a return of 17.9% annually, compared to 11.1% for the Dow.

The Dogs of the Dow caught on with the investing public, and several brokerage houses offer vehicles for following the strategy.