When it comes to investing there are many strategies, views, and opinions. In many ways none of these are wrong, they are just different. It is important to find investments that are aligned with your views, time horizon, and risk tolerance while remaining committed to your process and making adjustments as needed.
One such strategy that has been around for roughly thirty years now is the Dogs of the Dow. The process around this strategy is to invest in the ten highest yielding stocks of the Dow Jones Industrial Average (DJIA) at the beginning of the year and then rebalancing at the beginning of the following calendar year. One key consideration is to make sure you are rebalancing after you have held the group of stocks for twelve months and one day so any gains will be considered long term in nature, rather than short term if you are using this in a non-qualified account.
When owning stocks your total return comes from a combination of the income received from dividends (yield) and any capital appreciation/depreciation. As an example, if you buy a company that provides a dividend yield but its price is flat for the year you still will experience a positive overall return because of the yield. The dividend (yield) will provide you with a potential cushion should the price of the stock decrease as well.
The Dogs of The Dow is a strategy that attempts to take advantage of the yields of the companies in the Dow by buying the highest-paying dividend stocks available. This is by no means a strategy that works every year. It is a way to buy blue-chip companies that may not be trading at their highs but provide an attractive yield. This strategy is one that can be considered for investors that have the tolerance for monies being invested equally across ten equities. In most cases, this would not make sense for all assets in your portfolio because of it being heavily concentrated in ten securities. It could make sense for a portion of your investable assets.
We would be happy to discuss the Dogs of The Dow Strategy and how it may fit into your portfolio. Just contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time to discuss. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.