Need to Know: The Dogs of the Dow are now outperforming the stock market


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, -0.44% and the 29% rise for the S&P 500 index SPX, -0.15%.

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, +0.59% Dow 4.94% 6.1%
VZ, +1.13% Verizon Communications 4.93% -1.5%
IBM, +0.14% International Business Machines 4.91% -0.8%
CVX, -3.63% Chevron 4.57% 15.5%
WBA, +0.20% Walgreens Boots Alliance 3.66% -3.5%
MRK, -0.69% Merck 3.60% 5.1%
AMGN, +0.02% Amgen 3.45% -0.4%
MMM, -3.71% 3M 3.33% -3.2%
KO, -0.23% Coca-Cola 2.84% 0.7%
INTC, -2.98% 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, +3.79% 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, +6.74% joined rival payment processors Mastercard MA, +2.91% and American Express AXP, -0.17% in topping earnings forecasts.

Robinhood Markets HOOD, -4.47% 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, -0.76% contract underperforming the Nasdaq-100 NQ00, -0.58% contract.

The yield on the 10-year Treasury TMUBMUSD10Y, 1.802% was 1.83%.

Top tickers

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

Ticker Security name
TSLA, -0.62% Tesla
AAPL, +3.79% Apple
GME, -2.67% GameStop
AMC, -3.65% AMC Entertainment
NIO, -5.90% NIO
NVDA, -1.67% Nvidia
HOOD, -4.47% Robinhood Markets
XELA, +8.12% Exela Technologies
MSFT, -0.90% Microsoft
AMD, -1.83% Advanced Micro Devices
Random reads

Watch CNBC’s Jim Cramer douse an ARK with some Sark to make an exchange-traded fund metaphor.

Proving all publicity is good publicity, Barnard Castle set a record for visitors after a controversial lockdown trip there by a former aide to U.K. Prime Minister Boris Johnson.

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