The Dogs of the Dow is a very simple and passive strategy with the basic concept being to buy the ten highest yielders of the Dow 30 at year’s end and repeating the process annually. In 2021, the only Dog of the Dow that did not finish the year higher was Verizon (VZ) which shed 7.53% on a total return basis. On average across these names, the strategy would have returned 16.3%. That compares to a 20.69% return for the rest of the index. As we close out 2021, the only change to the Dogs of 2021 for next year is that Cisco (CSCO) which now yields 2.33% will drop out and be replaced by Intel (INTC) with its yield of 2.70%.
In the chart below, we show the cumulative total return of this strategy versus holding the entirety of the Dow going back over the past twenty years. Historically, the Dogs have tended to outperform the broader index, but since the pandemic hit, that has not been the case. Not only have the non-dogs been outpacing the highest yielding stocks in the index, but the dogs of the Dow have yet to break out (though they are getting close after the past few day’s rally) from the range that has been in place since early June. Click here to view Bespoke’s premium membership options.