In each of the last three years we have run a series of articles that tracked the performance of the Dogs of the Dow through the course of the year. What we have seen each year is that the Dogs of the Dow strategy has managed to outpace the overall Dow Jones.
The question, of course, is whether or not that will once again be the case in 2017.
Before jumping into this year’s group of stocks, let’s first review the strategy behind the Dogs of the Dow. The reasoning behind the strategy is actually fairly simple. At the start of each year, an investor would buy an equal dollar amount of each of the top ten yielding stocks in the Dow Jones, and hold those stocks through the course of the year, regardless of any individual performance.
The idea is that the stocks would not have such a high dividend yield, unless the underlying security was undervalued at year’s end, and thus should enjoy bigger gains than the rest of the stocks in the Dow Jones.
Let’s take a closer look at the first five stocks in this year’s group, review how the stocks performed in 2016, and what the initial outlook is for the current year.