As 2023 came to a close, investors experienced a pleasant surprise following the bear market in 2022. The Nasdaq Composite and S&P 500 delivered significant gains, driving the year to a close near record levels. The Dow Jones Industrial Average ((DJINDICES: ^DJI)) managed to set all-time records in late December, although its gains of roughly 14% for the year were relatively modest compared to broader indexes. Those who followed the popular Dogs of the Dow investment strategy were even more disappointed, as it underperformed the Dow significantly.
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Despite this, investors are hopeful for the return of past successes of the Dogs of the Dow strategy in 2024. Below, you’ll find the 10 stocks that qualify as the 2024 Dogs of the Dow, along with a preview of what some of these companies are anticipating in the coming year.
2024’s Top Dogs of the Dow
|
Stock |
Dividend Yield |
Rank in 2023 |
|---|---|---|
|
Walgreens |
7.21% |
4 |
|
Verizon |
7.13% |
1 |
|
3M |
5.52% |
5 |
|
Dow Inc. |
5.03% |
2 |
|
IBM |
4.06% |
6 |
|
Chevron |
3.98% |
9 |
|
Amgen |
3.14% |
7 |
|
Coca-Cola(NYSE: KO) |
3.13% |
– |
|
Cisco Systems |
3.09% |
8 |
|
Johnson & Johnson(NYSE: JNJ) |
3.04% |
– |
Data source: DogsoftheDow.com.
The Fundamentals of the Dogs of the Dow Strategy
Many investors find the Dogs of the Dow appealing due to its simplicity. The strategy involves identifying the 10 stocks among the 30 Dow Jones Industrial components with the highest dividend yield on the last day of the year. Investors then allocate an equal amount to each of these top-yielding stocks and hold these investments through the end of the following year.
If one chooses to continue with the Dogs of the Dow strategy in the subsequent year, they need to rebalance their investments to account for the relative performance of the 10 stocks. Additionally, they should replace any stocks with yields that have fallen below the threshold for Dogs of the Dow eligibility with those whose yields have risen sufficiently to take their place.
What’s in Store for the Dogs of the Dow in 2024?
The two stocks set to join the 2024 Dogs of the Dow list both faced challenges in 2023. Coca-Cola rejoined the group after a one-year hiatus, as the preference for consumer staples stocks in 2022 gave way to concerns about their ability to withstand inflationary pressures and maintain cost discipline. Meanwhile, with hopes returning to a faster-growth environment for sectors like technology, Coca-Cola’s reliable yet mature business declined by about 8% for the year.
Similarly, Johnson & Johnson’s healthcare business contracted, despite the successful spinoff of its Kenvue ((NYSE: KVUE)) consumer health products division. Lingering concerns about litigation related to its talc baby powder products tempered the company’s performance, despite modest gains in its dividend yield.
Conversely, the stocks leaving the Dogs of the Dow in 2024 fared well in 2023. JPMorgan Chase ((NYSE: JPM)) exited after a single year on the list, with over 25% gains as the Wall Street banking giant overcame industry pressures and capitalized on significant disruptions by making strategic asset acquisitions. Intel ((NASDAQ: INTC)) performed even better, with share prices rising over 90%, signaling that the long-lagging chipmaker might tap into the AI boom.
Can the Dogs of the Dow Triumph in 2024?
The Dogs of the Dow strategy lagged behind the regular Dow Jones Industrials by about four percentage points in 2023. However, the underperformance was somewhat mitigated by the higher dividend yield on Dogs of the Dow stocks, cutting the gap in half in terms of total returns. Regardless, the strategy underperformed the Dow for the fourth time in five years.
Many investors, nonetheless, remain hopeful that the value stocks commonly included in the Dogs of the Dow are poised for substantial gains in 2024. After the intense focus on high-growth tech stocks, a shift in favor of other sectors would be highly advantageous.
Unveiling the Power of the “Dogs of the Dow” Strategy
The “Dogs of the Dow” Strategy: Timeless Wisdom or Outdated Myth?
The “Dogs of the Dow” strategy, coined by Michael B. O’Higgins in the early 1990s, has drawn renewed attention in the financial community. The strategy encourages investors to select and hold onto the ten stocks with the highest dividend yield out of the thirty components of the Dow Jones Industrial Average.
Performance and Popularity: A Two-Sided Coin
Historically, the Dogs strategy has garnered attention for its purported ability to outperform the overall market. However, with its resurgence in recent years, it prompts the question: is the strategy still viable, or just a relic of the past?
The Dogs strategy showcases an ostensibly straightforward approach, appealing to both seasoned investors and newcomers. Its simplicity lures market participants, promising an uncomplicated yet effective investment tactic that resonates in an era marked by rapid change and complexity.
The Dogs of the Dow and the Investing Landscape
The newfound interest in the Dogs strategy mirrors a broader trend towards value investing and a re-examination of timeless wisdom. Amidst overcomplicated investment algorithms and increasingly convoluted financial instruments, the allure of the tried and true—a reliable old pooch, so to speak—is difficult to ignore.
Yet, as the tides of the market ebb and flow, with new technologies, regulations, and international trade dominating the discourse, has the mutt-derived approach lost its bite, or is it a dependable guard dog in times of uncertainty?
The Infatuation with Intel: A Distraction or a Diamond in the Rough?
Amidst the buzz about the Dogs strategy, the cacophony of financial advice can be overwhelming. Investors are bombarded with suggestions and predictions, replete with opprobrium and commendation alike.
Intel, while not a top pick according to one respected analyst team, remains a notable player in this investment narrative. How does one discern the signal from the noise in this dissonant chorus of omnipresent suggestions, and where does Intel fit into this mosaic?