At the start of each year, we always provide clients with the new “Dogs of the Dow” list. You’re more than likely already familiar with this strategy, but if you’re not, it says to simply buy the 10 highest yielding stocks in the Dow Jones Industrial Average at the start of each year. (You can read more about the strategy at this Investopedia link if you’re looking to learn more about the reasoning behind it.)
Today we checked up on the performance of this year’s Dogs of the Dow, and we found that the strategy has been absolutely crushing the market. As shown in the table below, the ten Dogs are up 12.82% on an equal-weighted price performance basis, and that doesn’t even factor in dividends. The remaining 20 stocks in the Dow are up just 0.57%, so basically all of the Dow’s gains this year have come from the 10 Dogs. Not one Dog is in the red for the year, and 8 of 10 are up double-digit percentage points. Caterpillar (CAT) was a stock that no one wanted to touch with a ten-foot pole coming into this year, but it’s currently the top performing stock in the entire index with a 28.78% gain. IBM and Exxon Mobil (XOM) are two other names that had been left for dead, but they’re both up more than 10%. The same goes for Chevron (CVX) and Wal-Mart (WMT).
With stock price gains across the board for this year’s Dogs, all but one (CSCO) has seen its dividend yield decrease this year. Caterpillar’s (CAT) dividend yield has dropped the most at 1.01 percentage points from 4.53% down to 3.52%. Even still, CAT would be a Dog once again if 2017 began today. The three 2016 Dogs that would fall off the list at this point, though, are Merck (MRK), Procter & Gamble (PG), and Wal-Mart (WMT). All three now have lower dividend yields than Coca-Cola (KO), Boeing (BA), and McDonald’s (MCD), which would be the three new additions.
There’s still nearly three months left of trading before the end of the year, and performance can change dramatically rather quickly as we all know. That being said, the run for this year’s Dogs has been quite remarkable.