In substance, Dogs Of The Dow is an investing strategy that consists of buying the 10 DJIA stocks with the highest dividend yield at the beginning of the year. The portfolio has to be adjusted at the beginning of each year and to include the 10 highest yielding stocks. This investment strategy is popularized by Michael B. O’Higgins in 1991.
Investing in the Dogs of the Dow is actually very simple. After the stock market closes on the last day of the year, of the 30 stocks that make up the Dow Jones Industrial Average, you should select the ten stocks which have the highest dividend yield. Next, just get in touch with your broker and invest an equal dollar amount in each of these ten high yield stocks. Then hold these ten Dogs of the Dow for one year. Repeat these steps each and every year. This is it!
If you are an investor that seeks for simplicity, this is the most appropriate strategy for you. One telephone call to your broker per year and your Dogs of the Dow portfolio is ready to go.
This strategy was formulated in the distant 1972 and has proved during all that time to be successful. Actually, as Dog of the Dow investors readjust their portfolios each year, it places pressure on the stocks involved.
However, several assumptions has been made. The first assumption is that the dividend price reflects the company size rather than the company business model. The second is that companies have a natural, repeating cycle in which good performances are predicted by bad ones.