Does the Dogs of the Dow Investment Strategy Still Work?

DOW Jones dividend

DOW Dividend

An amusing thing occurs on Jan second of each year. Hundreds and thousands of speculators wake up and run to their PC like it’s Yuletide morning. They are in a great rush to do one or two fast calculations and identify their investment technique for the new year. Based on this little of maths they blindly make all of their investment choices. It is an easy method. With a method based totally on the stocks which make up the DJX Business Average, these speculators are on the lookout for high dividend yields. Their hope ( like extraordinarily financier ) is to outperform the market.

So, what methodology am I talking about?

The “Dogs of the Dow” investment concept naturally. In 1991 Michael O’Higgins revealed a book called “Beating the Dow.” Michael, according to his own autobiography, is widely considered one of the finest investment bosses in the States.

He started on Wall St in 1971 and set up his very own cash management firm in 1978. In this book he put forth a really easy plan of purchasing the ten DJX stocks with the highest yields. In the last five and ten year periods, the technique really underperformed the market.

In the go-go days of the Net, people were less targeted on conventional companies that paid dividends. As a consequence, the technique did not beat the averages. Further, in 2004 and 2005, the method failed again – sadly.

Then in 2006 the technique performed well, outperforming by ten percent. This, sadly, brought replenished life to the Dogs of the Dow. In 2007 the results were again unimpressive. The top ten corporations chose this year included : Pfizer, Verizon, Altria, ATT, Citigroup, Merck, General Motors, DuPont, General Electrical , and JP Morgan Chase.

A basket of these stocks, one share each, would have cost roughly $427.50 and you’d be ready to sell them today for $424.12. Including dividends the method returned a measly 3.5%. The DJX in total is up this year just about 7%. Excluding dividends. Just making an investment in the DJX outright would have produced better results than following the “Dogs” method.

Why did the results in 2007 fail so unhappily after such a good 2006? You can without delay tie the disappointing results this year to 2 stocks Citigroup ( C ) down 47% and General Motors ( GM ) down 17%.

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