Whats old is new again — the Dogs of the Dow are outperforming the stock market – MarketWatch

The Dogs of the Dow strategy has been around awhile. It’s where investors pick the 10 stocks with the highest dividend yield in the Dow Jones Industrial Average at the end of the year, and invest equally in each one for the duration of the following year. Since they are high yielding, they are “dogs,” i.e. out of favor with investors. It was popularized in the 1991 book “Beating the Dow” by Michael O’Higgins.

It wasn’t the right strategy for 2021, when the Dogs generated a 16% return, underperforming the 21% rise for the broader Dow Jones Industrial Average
DJIA
and the 29% rise for the S&P 500 index
SPX.

But now the Dogs have some bite, at least in relative terms. The Dogs so far have returned 1%, outperforming their noncanine Dow counterparts that have dropped 6%, and the S&P 500, which has retreated by 9%. Then again, an investor can just go to cash and get similar returns without any risk.

Ticker

Company

Yield at end-21

YTD change

DOW Dow

4.94%

6.1%

VZ Verizon Communications

4.93%

-1.5%

IBM International Business Machines

4.91%

-0.8%

CVX Chevron

4.57%

15.5%

WBA Walgreens Boots Alliance

3.66%

-3.5%

MRK Merck

3.60%

5.1%

AMGN Amgen

3.45%

-0.4%

MMM 3M

3.33%

-3.2%

KO Coca-Cola

2.84%

0.7%

INTC Intel

2.70%

-6.4%

Source: Dogs of the Dow website

This year has marked the widest gap in returns between the Dogs and the broad Dow 30 through the first 18 trading days of the year since 2001, says Jake Gordon, an analyst at Bespoke Investment Group.

The buzz

Apple
AAPL
rose 3% in premarket trade reported fiscal first-quarter earnings and sales well ahead of estimates, as its CEO Tim Cook told The Wall Street Journal that it expected revenue in the current quarter to grow. Read what analysts are saying about Apple.

Visa
V
joined rival payment processors Mastercard
MA
and American Express
AXP
in topping earnings forecasts.

Robinhood Markets
HOOD
slumped 14% in the premarket, after the online broker’s results disappointed investors. Heading into Friday, Robinhood shares have dropped 85% from their August peak.

One Dog of the Dow, Chevron, slipped as the oil major missed earnings estimates.

Employment costs in the fourth quarter rose 1%, though that was below estimates. Personal income also came in below estimates.

The market

U.S. stock futures zig-zagged ahead of the open, with the S&P 500
ES00
contract underperforming the Nasdaq-100
NQ00
contract.

The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was 1.83%.

Top tickers

Here were the most active tickers on MarketWatch as of 6 a.m. Eastern.

Ticker

Security name

TSLA Tesla

AAPL Apple

GME GameStop

AMC AMC Entertainment

NIO NIO

NVDA Nvidia

HOOD Robinhood Markets

XELA Exela Technologies

MSFT Microsoft

AMD Advanced Micro Devices

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