Dogs of the Dow: The Top 10 Stocks to Buy in 2019

Dogs of the Dow: The Top 10 Stocks to Buy in 2019

dogs-of-the-dowThere are a vast array of investment strategies – ranging from complex options tactics to simply buying an S&P 500 index fund. Are you looking for a simple, relatively conservative, high dividend investment approach?  One that’s likely to beat the S&P 500 and the Dow Jones Industrial Average – yet, is easy to implement? You may want to consider the “Dogs of the Dow”.

Dogs Dow Theory

With the Dogs of the Dow, you’re simply buying the 10 highest yielding stocks from the Dow Jones Industrials.  A stock’s dividend yield is the simple ratio of annual dividends divided by the share price.

Becoming the Dow’s highest dividend yield stocks essentially means falling out of favor so the dividend yield increases due to a drop in the stock price.  For example, if a stock is expected to pay out $1 in dividends over the next year and is currently trading for $50, its dividend yield is 2%. If that stock drops to $25 but still pays out $1 in dividends, it now has a 4% yield.  A lower stock price with the same dividend amount calculates to a higher dividend yield.

Dogs Dow Strategy

The way you pick the Dogs is very simple.

  • When the year starts, look at the top 10 high yield stocks in the Dow Industrials.
  • Invest equal amounts of money in all 10 stocks.
  • Hold onto those stocks throughout the year.
  • At the end of the year, do it all over again.

Proponents of this approach recommend the Dogs as the best stocks to buy at the beginning of each year.   Hold them for twelve months.  At the end of the year, repeat the process. This investment strategy has beat both the Dow and the S&P 500 most years since 2000.  Between 2000 and 2016, the Dogs of the Dow returned 8.6% annually, while the S&P 500 garnered 6.2%.  Dow Industrials are arguably some of the highest quality stocks you can buy.  It is easy to see why many consider these to be the top 10 stocks to buy every year.

Small Dogs of the Dow

Puppies of the Dow are 5 stocks to buy with the lowest share prices.  They are a subset of the 10 Dogs of the Dow – the bottom 5, numbers five through ten. Historically, this group has performed even better than a strict Dogs of the Dow investment strategy.  That makes these small dogs the top 5 stocks to buy in 2019.

From 2000 through 2016, the Puppies of the Dow, earned a 10.45% annualized return. That’s more than 4% greater than the S&P 500’s annualized gain of 6.2% and approximately 2% above the 8.6% return of the standard Dogs of the Dow approach during that same period.

As is the case with all investment approaches, the returns don’t follow this pattern every single year. Between 2012 and 2016, both the Dogs and the Puppies of the Dow beat the S&P 500 each year. Yet, in 2016 the Dogs of the Dow beat the Small Dogs of the Dow. In 2017, the S&P 500 returned 21.64%, while the Dogs earned just 19%.

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Are you interested in penny stocks to buy?  Check out How to Buy and Trade Penny Stocks…