The Dogs of the Dow had a rough first half of the year. The group has lagged the overall market through the majority of the year, but as it stands the group is managed to gain an average of 6.0% on the year, while the Dow Jones is currently up 4.5% year to date.
The idea behind the strategy is that you would purchase an equal dollar weighted amount of the ten stocks in the Dow Jones with the highest yields at the start of the year and hold them through the course of the year regardless of performance. The reasoning behind the strategy is that the stock’s yields have risen due to shares being undervalued and should rise more than the overall market in an up market or fall less than the overall market in a down market.
With the stocks being the top yielding stocks in the Dow, you also get the benefit of periodic distributions, which can add a nice boost to the group’s overall performance. To better illustrate the power of the distributions, consider that while the group is currently up 6.0% on the year, if you were to strip out the dividends paid thus far in 2018, the gain would actually be 3.9%, which would lag the overall market.
With the current earnings season all but in the books, now is a great time to take a look at this year’s group and see which stocks have been pulling the group down, and which have provided a the needed boost to push the group’s higher than the Dow.