Dogs of the Dow: A Contrarian Dividend Strategy Explained
Want the laziest dividend strategy known to mankind? Buy the 10 highest-yielding Dow stocks each January, hold for 12 months, repeat. Whether it still works is the better question.
The Dogs of the Dow rules in one table
| Step | Rule |
|---|---|
| 1. Universe | Take the 30 stocks in the Dow Jones Industrial Average |
| 2. Filter | Rank by trailing dividend yield, pick the top 10 |
| 3. Sizing | Equal weight, 10% in each position |
| 4. Hold | Exactly 12 months, no in-year tinkering |
| 5. Rebalance | Repeat the screen, sell anything that drops out |
| 6. Wrapper | ISA shelters the heavy dividend income from UK tax |
Mechanical, transparent, and cheap to run. The discipline is in not deviating.
Key takeaways
The Dogs of the Dow strategy involves selecting the 10 Dow Jones stocks with the highest dividend yields each year and holding them for exactly 12 months.
The strategy is based on the idea that temporarily underperforming blue-chip stocks can offer value when their prices fall or their dividends remain stable while competitors’ dividends grow.
The strategy has shown mixed results historically, outperforming in some periods and underperforming in others, especially during tech booms.
The Dogs of the Dow strategy can be applied to other indices, like the FTSE 100, following the same principles of identifying high-yielding, mature companies.