As was the case when we last checked in on this year’s Dogs of the Dow, the group of ten stocks in this year’s group continue to trail the overall market, but they have narrowed the gap a bit.
The last time we looked, near the start of March, the Dow Jones was up a modest 0.3% while the Dogs of the Dow were down 5.5%. Over the last six weeks, the Dow Jones has given up ground, and through the end of April the index was down 2.3% for the year. On the other hand, the stocks in this year’s Dogs of the Dow have improved and are now down just 4.2% year to date.
While the gap has closed, it is important to note the importance of dividends in the strategy. If you stripped away the dividends that the group has been paid so far this year, the average loss would be 5.2%, which is basically in-line with where the group was trading in March before this year’s distributions began.
The whole idea of the Dogs of the Dow is that you would be an equal dollar-weighted position in the ten stocks in the Dow Jones with the highest dividend yields at the start of the year. The strategy assumes that the yields have risen to their levels because the underlying securities fell into oversold territory, and yield hunters would drive shares higher than the overall market in search of income.
The added bonus is that the collection of stocks will enjoy nice dividend payments through the year, and we have already seen where this year’s distributions resulted in the group being down just 4.2% versus 5.2% had there been no dividends paid during the year.
With the market being so volatile as of late, it is not surprising that some of the stock’s in this year’s group have taken a beating. In fact, only three of the ten stocks are in positive territory for the year, with two of the stocks showing major losses which are pulling down the overall group.
Let’s look at each of the ten stocks, and how they have fared so far in 2018. Bear in mind that dividend payments have been included in all return calculations.