Dogs of the Dow doing it again

I'm large and in charge.

At the beginning of every year a lot of fuss is always made over the "Dogs of the Dow" strategy. While some market know-it-alls discount the Dogs strategy as a complete myth, there is no discounting the fact that this strategy is widely followed.

The Dogs is one of the simplest investment strategies around. At the start of the year, investors purchase an equal-weighted basket of the 10 highest yielding Dow Jones Industrial Average (DJIA) stocks. The basket is rebalanced at the beginning of each year with the new set of high yielders.

So far in 2012, the Dogs outperformed the DJIA by a wide margin. Not including dividends, the strategy returned 8.4%, compared to a 5.0% increase for all DJIA components. Breaking the basket down: AT&T (T) is up 16.7% year-to-date, Merck (MRK) up 15.1%, Verizon (VZ) up 10.9%, General Electric (GE) up 10.9%, Pfizer (PFE) up 9.5%, Kraft (KFT) up 7.5%, DuPont (DD) up 6.7%, Intel (INTC) up 5.2%, and Johnson & Johnson (JNJ) higher by 4.7%. The sole laggard in the basket is Procter & Gamble (PG) down 3.0% YTD.

The yield on the 2012 Dogs of The Dow strategy as at 12/31/2011 was 3.95%.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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