This dynamic approach allows investors to capitalize on opportunities and respond to changing conditions, making the Dogs of the Dow strategy more adaptable and responsive to the market. What sets this strategy apart is the availability of real-time data and live lists, providing investors with greater flexibility. While the traditional approach involves selecting and investing in these stocks at the start of the year, a live list enables active investors to modify their portfolio on any trading day.
How the 2023 Dogs of the Dow fared
Four of the Dogs returned more than 45%, more than making up for the six Dogs that underperformed the index (one of which lost 8% in value). Verizon sports an eye-popping $136 billion in debt, but is a strong enough credit to be able to refinance this out into the future ad infinitum. For this reason, and its strong cash flows, Value Line rates the stock A++ for financial strength, a designation that no other telecom has, including AT&T (T). Dow (DOW, $50.07) is in the doghouse, and perhaps well it should be given declines and lumpiness in earnings.
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For investors, that leaves software and consulting as the businesses to watch, which were up 7.5% and 5.4%, respectively, in the last quarter. The core markets these businesses address – cloud computing, consulting and hybrid AI – are growers. Global IT spending is anticipated to rise to $4.6 trillion in 2025, up 5% over 2022, according to research firm Gartner. IBM is poised to increase revenues from this spend, and in this respect, there is an achievable and sustainable path to growth.
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The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. By monitoring the live list and identifying a stock entering the Dogs list due to a recent price decline, you might choose to invest in Dow stocks mid-year to capture potential Dogs of the dow 2023 dividend income. Suppose one of your Dogs significantly outperforms the others, and its dividend yield drops below that of other DJIA components. In that case, you can replace it with a higher-yielding stock from the live list. Investors can choose between these ETFs and mutual funds to gain exposure to dividend-yielding stocks that align with the Dogs of the Dow strategy.
Understanding the mechanics of the strategy can provide valuable insights for potential investors. The Dogs of the Dow strategy is designed to be accessible and relatively straightforward for investors, particularly those who prefer a hands-on approach but don’t want to delve into the intricacies of stock analysis. The idea is that the Dow stocks with the highest yields are often the ones that have underperformed recently, or even lost value. A strong third-quarter earnings report from International Business Machines (IBM, $147.64) in October sent shares up 6%.
- A longtime space contractor, Boeing has had to overcome multiple Starliner problems over the years.
- This strategy requires rebalancing at the beginning of each calendar year.
- Further, it forecast current-quarter sales below expectations and said it expects a $400 million hit to core profit from cost and inflationary pressures.
- So investors may not be able to offset capital gains by selling the losers and realizing those losses.
- Over the year, such stocks can rebound, potentially outperforming the broader market—a key principle of this strategy.
ETFs and Mutual Funds that Track the Dogs of the Dow
This is Boeing’s first time launching astronauts, after flying a pair of empty Starliners that suffered software and other issues. Even before Wilmore and Williams blasted off June 5, their capsule sprang a leak in propulsion-related plumbing. Boeing and NASA judged the small helium leak to be stable and isolated, and proceeded with the test flight. But as Starliner approached the space station the next day, four more leaks erupted. Chevron (CVX 1.46%) did exceedingly well in 2022’s bull market in crude oil and other energy products. However, a return to more normal conditions and steady drops in prices of petroleum and natural gas weighed on revenue and profits for Chevron.
Dogs of the Dow is a long-term investing strategy that is relatively simple in its execution. It is designed to provide investors with a good chance at generating strong returns, while also being relatively lower-risk. Its focus on dividend stocks also makes it compelling to investors looking for income. The Dogs of the Dow strategy has gained in popularity since Michael O’Higgins’ book, Beating the Dow, was first published in 1991. The idea behind this strategy is that investors can profit from the relative strength of Dow stocks and the opportunity to buy undervalued components using dividend yield as a proxy for valuation.
Then, you would divide your money equally and invest in the top fifteen Dogs. This means they are “the official dogs of the Dow.” However, changes in the market mean that the live list of top Dogs changes frequently. If you are using the official Dogs of the Dow stock list, these frequent changes do not affect you because the strategy dictates you hold these stocks until the end of the calendar year. However, if you use the live list to adjust your portfolio actively, keeping track of this information is essential to the success of your strategy.
The process begins at the stock market’s close on the year’s last trading day. At this point, investors identify the 10 stocks within the Dow Jones Industrial Average (DJIA) with the highest dividend yields. Once the Dogs https://investmentsanalysis.info/ are identified, investors allocate an equal dollar amount to each of these 10 stocks. This equal-weighting approach ensures that no single stock dominates the portfolio, distributing risk across the selected companies.
There is the Hartford Dividend and Growth Fund (HDGIX) for those preferring mutual funds. This mutual fund focuses on blue-chip companies known for their dividend payments and capital appreciation potential. It includes most of the stocks commonly found in the Dogs of the Dow strategy. Another critical aspect of the analysis involves comparing the Dogs’ performance to the broader market, represented by the DJIA. Did the Dogs collectively outperform or underperform the DJIA during the year?
