Tags: Dogs | Dow | best | breed

SmartMoney: ‘Dogs of the Dow’ Represent Best in Breed

Wednesday, 15 Aug 2012 11:27 AM

By Dan Weil

The “Dogs of the Dow” investment strategy is a big winner so far this year.

That strategy involves buying the 10 stocks in the Dow Jones Industrial Average with the highest dividend yield at the end of the year.

The stocks are called “dogs” because the high yield presumably reflects weakness in the stock price, rather than a company strong enough to boost its dividend.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist. 

So far this year, the 10 Dow stocks with the highest yields as of last Dec. 31 have generated a total return of 14 percent compared with a return of 10 percent for the Dow average as a whole, SmartMoney reports.

The 10 dogs sport an average yield of 3.65 percent, more than twice the 1.77 percent yield for the 10-year Treasury note.

The dog pound includes blue chips General Electric (GE), AT&T (T), Verizon (VZ), Procter & Gamble (PG), Pfizer (PFE) and Merck & Co. (MRK).

Brian Peery, co-manager of the Hennessy Total Return fund, which has 75 percent of its assets in the dogs, likes the strategy’s discipline. "[It] works so well because it doesn't take into account your personal feelings," he told SmartMoney.

Another investment strategy for dividend-stock investors is to buy shares of companies that increase their dividend.

Kiplinger’s Personal Finance recently cited three strong mutual funds employing that strategy: Vanguard Dividend Growth, (VDIGX), T. Rowe Price Dividend Growth (PRDGX) and Ave Maria Rising Dividend Fund (AVEDX).

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist. 

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