Dogs of the Dow
The Dogs of the Dow investment strategy is one our founder, Mr. McBride, has used for over twenty-five years. The theory is very simple, conservative and successful. The implementation is straightforward:
- Every January, for each participating client, our firms buys the top ten dividend yielding stocks on the Dow Jones Industrial Average. Dividend yield is the annual dividend (in dollars) divided by the stocks share price. The list is generated each December 31st of the preceding year.
- We buy each of the ten stocks in equal dollar amounts.
- All positions are held for one year, rain or shine. There is no trading after the January purchases.
- The follow January, our firm sells the stocks that fall of the list and replaces those positions with the new entrants.
Although simple, the strategy has produced consistently good returns year-after-year. Ideally (and often) the strategy outperforms the three major US equity indices on the upside and holds its own in down markets. For example, in 2016 the strategy was up 16%. It outperformed the Dow Jones Industrial Average (up 13.4%), the S&P 500 (up 9.5%) and the NASDAQ (up 7.5%).
Conversely, in 2018 the U.S. markets took a massive hit in the fourth quarter of 2018, leading the S&P 500 to lose about 6.2% for the whole year. The Dow was down 5.6% and the NASDAQ declined 3.9%. The Dogs of the Dow lost only 1.5%. But, always remember, past performance is no guarantee of future results.
It is important to note the Dogs of the Dow is an investment strategy, not a tax strategy. There may be both short and/or long term capital gains. We are agnostic regarding taxation.
Below is an excellent video from CNBC outlining the Dogs of the Dow strategy.