Wednesday, January 31, 2018

Dogs of the Dow confirm their effectiveness in 2017

Of all stock-picking strategies that exist out there (and there are too many to list here) one stands out for its simplicity and success over many years. According to the “Dogs of the Dow” investment strategy, investors should choose, at the start of every calendar year, the 10 highest-dividend-yielding Dow Jones Industrial Average (DJIA) stocks after the stock market closes on the last day of the year, investing equal amounts in each of those stocks. The same should be done the following year, and every year after. The rationale is quite simple – this strategy selects the stocks with the lowest prices relative to the dividends they pay out, with the expectation that their prices will rise most so that their dividend yield reverts to the average yield for the group of 30 stocks that make up the DJIA Index.

The theory states that it’s a long-term strategy which should take years to unfold as there is no guarantee that the Dogs will beat the return of the DJIA Index each year. The strategy has been back-tested to the 1920s and it was found to have consistently outperformed the market as a whole. Lately, the Dogs have been beating the DJIA Index on an annual basis, including the last year when an equal weighed portfolio of the 2017 Dogs outperformed the DJIA Index by more than 4 percentage points (

There is also the Small Dogs of the Dow strategy which has shown even better results in the past several years while market experts continue to invent other strategies that are expected to beat the good old Dogs of the Dow. Talk to the UCU’s Wealth Strategies Team to learn more about investment strategies that might be appropriate for your risk tolerance.

Ukrainian Credit Union Limited

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