This is the fifth straight year we have run a series tracking the progress of the Dogs of the Dow through the year. Last year was the first time that the strategy failed to keep pace with the overall market, and 2018 is shaping up to be another tough year for this year’s group.
The market has been a pretty volatile market, but the Dow Jones average has managed to eek out a 0.3% gain year to date. On the other hand, the last two months have been harder on some of the stocks in this year’s group, which is down by an average of 5.5% so far in 2018.
For readers not familiar with the Dogs of the Dow strategy, the basics for the strategy is that you would purchase an equal dollar-weighted amount of the ten stocks in the Dow Jones that have the highest dividend yields at the beginning of the year, and hold the positions for the entire twelve months regardless of their performance through the year.
The logic behind the strategy is that the stocks yields have risen too high because the stock price has fallen too low. When this is actually the case, the stocks should rise more than a bull market, and drop less than a bear market.
Of course, this is not always the case, and sometimes a stock’s price drops for good reasons, and yield alone will attract new investors to push shares higher. This happened in 2017, and so far is repeating the trend in 2018.
Let’s look at the ten stocks in this year’s group, and how they have fared so far this year.