This annual rebalancing allows the strategy to focus on the highest-yielding stocks yearly. Unexpected market events or economic conditions might create opportunities. You can adapt your strategy by staying updated with the live list and monitoring dividend announcements.

Below, you’ll see the 10 stocks that qualify as the 2024 Dogs of the Dow, and you’ll also get a preview of what some of these companies are looking forward to in the coming year. While it may not outperform the broader market every year, it is virtually guaranteed to provide investors with a combination of attractive current yield with steadily rising income over time. Click here to instantly download your free high dividend stocks spreadsheet of 200+ securities now, along with important investing metrics.

International Business Machines (IBM)

Rebalance and reallocate your capital accordingly and repeat the process. In addition to the simplicity and focus on quality, value, and income that this strategy generates, it also improves discipline by preventing excessive emotion-driven trading. In particular, those following the popular strategy known as the Dogs of the Dow had to struggle through another year of underperforming the Dow and other major market indexes. Unlock the timeless value of gold with our exclusive 2025 Gold Forecasting Report.

Intel (INTC 1.66%) fared even better, seeing its shares soar over 90% amid signs that even the long-lagging chipmaker might participate in the boom in artificial intelligence. When the end of the year comes, you can either abandon the Dogs of the Dow strategy entirely, or you can repeat it for the following year. Dividend cuts are rare, but they are certainly not unheard of among stocks in the Dow 30.

Fetching Returns with the Dogs of the Dow

Before diving into the list of the Dogs of the Dow in 2023, let’s first understand the Dow 30. Dogs of the Dow relies on the premise that blue-chip companies do not alter their dividend to reflect trading conditions and, therefore, the dividend is a measure of the average worth of the company. In contrast, the stock price does fluctuate throughout the business cycle. “Dogs of the Dow” is an investment strategy that attempts to beat the Dow Jones Industrial Average (DJIA) each year by leaning portfolios toward high-yield investments.

Long-term returns paint a picture of major outperformance versus the Dow and S&P 500.

A strong third-quarter earnings report from International Business Machines (IBM, $147.64) in October sent shares up 6%. Though welcome, it feels like Lucy might be yanking the football from Charlie Brown. Shares of IBM, at about $147, are still below where they started 2018. While these dogs may not be the best Dow dividend stocks, they certainly offer a lot of yield. For instance, Verizon’s (VZ) dividend, at nearly 7%, rivals the long-term return of the S&P 500. In most instances, the proposition here comes down to getting paid a lot to wait out whatever malaise a company is facing.

ETFs and Mutual Funds that Track the Dogs of the Dow

The investing strategy requires you to have equally weighted positions in the ten Dogs of the Dow. For example, at the end of the calendar year, an investor should select the ten highest-yielding Dow 30 stocks. Then, they rebalance their portfolio at the beginning of the new year to return to a 10% allocation for each stock. You may also need to sell stocks no longer in the Dogs of the Dow due to changes in the Dow 30 or price appreciation and corresponding declines in dividend yield. Note that equal weighting means that the strategy does not follow the same principle of price weighting as the underlying index.

If you adhere to the Dogs of the Dow strategy, you may likely find you will be overturning your position in VZ come this time next year. The last time Verizon Communications (VZ, $38.55) was not among the top five Dogs of the Dow was in 2009. VZ has been in the doghouse so long, the reasonable investor might question whether it will ever get out. The telecom business is tricky, and every time Verizon zigs, telecom zags. The latest example was in 2021 when the company spent nearly $46 billion – more than any other major telecom company – on broadband licenses in anticipation of a 5G world that has yet to materialize. Remember, it was just three years ago that Dow was spun out of DuPont (DD), and is still finding its sea legs.

• This figure represents the collective dividend yield of these stocks, showcasing their appeal to income-focused investors seeking dividends as a source of returns.
• We emphasize dividend yield, conservative payout ratio and valuation in our five picks.
• Dividends are at the heart of the Dogs of the Dow strategy, but stock buybacks are another way that companies return cash to shareholders.
• From 1992 to 2011, this variation outperformed both the Dow and S&P 500 with an average annual total return of 12.6%.

Moreover, you’d consider how well the Dogs of the Dow portfolio achieves diversification. Does it provide exposure to a variety of industries and risk profiles, or is it heavily skewed toward certain types of stocks? Lastly, evaluating how effective the Dogs of the Dow strategy is Dogs of the dow 2023 at generating income through dividends is crucial. Investors following this strategy typically seek a reliable income stream, so you would assess whether the chosen stocks delivered on this front. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence.

• Today, the Technology, Financials, and Healthcare sectors have a significant representation in the Dow 30.
• Eight of the ten stocks on this list were on the Dogs of the Dow 2022.
• If that proves to be the case, it would be a good sign for the Dogs, which historically have done better in value-friendly market environments.

Explore why gold remains the ultimate investment for safeguarding wealth against inflation, economic shifts, and global uncertainties. Whether you’re planning for future generations or seeking a reliable asset in turbulent times, this report is your essential guide to making informed decisions. Additionally, observing its long-term potential and diversification benefits aids in aligning the strategy with individual investment goals. Learn about all 55 Dividend Kings, get a downloadable spreadsheet, see their yields, valuations, and business analysis. We can’t retire off of 4.5% in annual yield—a “perfect” amount of portfolio income is closer to 7%. Even if we put a million bucks to work on the Dogs, we’d still only be netting $45,000 a year.

However, waiting it out with a 5% yield, and the financial strength to maintain it, may prove to be alluring for many investors. But ultimately, every dog has its day, and the ones that were at the bottom of the heap many times show up at the top. For the 20 years ended 2020, the Dogs of the Dow strategy returned 9.5% versus 7.5% of the S&P 500, a spectacular beat. It underperformed the S&P 500 in 2021 by 16 percentage points and so far this year, the Dogs are down less than the market at large. Then, on the first trading day of the new year, invest an equal dollar amount in each of them. Hold the portfolio for a year, then repeat the process at the beginning of each subsequent year.

This means that investors commit to holding these stocks for a full calendar year, regardless of market fluctuations or developments. Investors review the current DJIA components to identify the 10 stocks with the highest dividend yields. These newly selected stocks become the Dogs for that year, and the portfolio is adjusted accordingly.

Even better, many investors could double, triple, even quadruple the dividends they’re receiving from the average S&P 500 stocks. This is rooted in an “old-school” value approach that views big dividends as a sign that high-quality blue chips are undervalued. And with just three simple steps, executed just once per year, we can create our own Dow Dogs ETF (minus the annual fees). Coca-Cola had a +10.6% total return, and Merck was up 49.4% compared to the (-18.1%) return of the S&P 500 Index. Merck was one of the top-performing Dividend Aristocrats and Dow 30 stocks and thus the yield declined.

The Dogs of the Dow strategy lagged the regular Dow Jones Industrials by about four percentage points in 2023. However, the underperformance wasn’t quite as bad as it looked, because the higher dividend yield on Dogs of the Dow stocks cut the gap in half in terms of total returns. Nevertheless, the strategy underperformed the Dow for the fourth time in five years. The Dogs of the Dow strategy presents investors with a straightforward yet effective method for capitalizing on the income-generating potential of blue-chip stocks. By honing in on dividends and selecting the highest yielders from the Dow Jones Industrial Average, this strategy offers an accessible approach that doesn’t require complex analysis or constant monitoring. Its historical performance often closely aligns with that of the broader market, making it an appealing option, particularly during periods of value-focused investing.