Dogs of the Dow System

The Dogs of the Dow investment strategy first became popular after Michael B. O’Higgins’s published the book, Beating the Dow, in 1991 where the phrase Dogs of the Dow was first used.

The Dogs of the Dow strategy is a simple strategy based on the theory that a high dividend yield means a stock’s price is oversold. Using the Dow Jones Industrial Average Components as a filter for the watch list is an attempt to only buy the safest and most durable stocks of companies with the least possibility of real long term fundamental risk. The system tries to create a good risk/reward ratio and margin of safety on entry by buying the stocks of companies with the best yield for income and also the relative lowest prices.

Dogs of the Dow Strategy

The quantified system used to find the best value and income stocks is when the stock market closes on the last day of the year, filter the DJIA for the 11 highest dividend yielding stocks by yield percentage versus the stock price. Then the buy signals are triggered on the first trading day of a new year. You skip the lowest priced stock because that one probably does have fundamental issues versus being a value and a good income generator. Very low prices can be a red flag warning for the stock of a company as risk may be priced in.

There are three different position sizing strategies suggested in the book. The author explains you can either put all your money in the second to lowest priced with the best yield, or 20% of your money in each of the 2nd-6th stocks, or 10% of your money in the 2nd to 11th stocks that are the lowest priced with the best yield. The strategy is to rotate your holdings once a year based on the 2nd through 11th highest yielding DJIA components.

He shows the backtested history of this method as delivering huge gains. It is a quantified mechanical value investment system with an edge to think about or use it to develop your own depending on your method, risk tolerance and return goals.

Current Dogs of the Dow 2022

Here are the current top eleven top Dogs of the Dow in 2022 listed below. Updated daily here.

dogs of the dow 2022

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