Investors should evaluate individual companies’ financial stability, prospects, and long-term potential before making investment decisions. Collectively, the Dogs of the Dow 2023 offer investors a carefully curated portfolio of high-yielding stocks with the potential to provide both stable income and long-term growth. This strategy has consistently outperformed the DJIA over extended periods, making it a compelling choice for investors seeking reliable returns. Every year, the Dogs of the Dow are determined by selecting the ten stocks with the highest dividend yield from the Dow Jones Industrial Average. Investors allocate an equal amount of money to each of these stocks and hold them for the entire year.
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If investors are looking for pure returns, then the DJIA or the S&P 500 work as a better overall investment for the long term. The 10 companies in the Dow Jones Industrial Average that pay the highest dividend yield as of the last trading day of the year are chosen to be in the Dogs of the Dow. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.
IBM is poised to increase revenues from this spend, and in this respect, there is an achievable and sustainable path to growth. However, this growth is likely to be slower and steady rather than rapid and meteoric. After all, Alphabet’s (GOOGL) Google and Microsoft (MSFT) are swimming in the same pond. Despite the 2023 setback, the “Dogs of the Dow” strategy has demonstrated its potential for outperformance in previous years. In 2021, for instance, the strategy outpaced the Dow Jones Industrial Average index with a significant gain of 25.3% compared to the index’s 21% return.
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A look at the cash flows for the first six months of the year shows about $5.4 billion in dividends paid, which was covered more than three times over by almost $18 billion in cash flow from operations. As a footnote, IBM did show an operating loss of $3.2 billion during the last quarter, which might give pause. This loss was attributable to a change in pension operations, resulting in a $6 billion charge that had no impact on the company’s cash.
- A look at the cash flows for the first six months of the year shows about $5.4 billion in dividends paid, which was covered more than three times over by almost $18 billion in cash flow from operations.
- Despite the underperformance in 2023, the Dogs of the Dow strategy remains a popular choice for income-oriented investors seeking a steady stream of dividend income.
- The strategy is also meant to be a long-term strategy requiring less effort than constant trading.
- Though welcome, it feels like Lucy might be yanking the football from Charlie Brown.
- The soaring share price sent Merck’s dividend yield down almost a full percentage point.
But the devil is in the details, and in healthcare, there’s a lot of them. For 2023, the Dogs of the Dow roster comprises a mix of established blue-chip companies with a track record of resilience and consistent dividend payments. These include industry giants like Walgreens, Verizon, 3M, Dow Inc, IBM, Chevron, Amgen, Coca-Cola, Cisco Systems, and Johnson & Johnson.
Of course, all these construction plans consume capital, hence the decline in Intel’s free cash flow seen in its second-quarter report. Numerically, it’s possible that capital expenditures will squeeze the dividend. Management would be loathed to cut it, but in the uncertain semiconductor landscape, anything is possible. The company has been losing market share to competitors after falling behind Advanced Micro Devices (AMD) in chip innovation and to Taiwan Semiconductor Manufacturing (TSM) in fabrication.
Dogs of the Dow 2023
Of course, you and I know that high yields don’t mean a stock is a value—sometimes they just mean a stock is cheap. The Dogs strategy showed cracks in 2019, really fell off the rails in 2020 and came up short again in 2021. Then, on the first trading day of the new year, invest an equal dollar amount in each of them. Hold the portfolio for a year, then repeat the process at the beginning of each subsequent year. For example, the annualized return was about 9.2% compared to approximately 16.0% for the S&P 500 Index in the past decade through 2021. The Dogs of the Dow website is primarily dedicated to the investing strategy.
Pros and Cons of the Dogs of the Dow Approach
However, the investing strategy argues that these stocks can have significant gains in stock price plus relatively high dividend yields. This point is because the stock is thought to be temporarily oversold. The Dogs of the Dow strategy, which involves investing in the 10 highest-yielding stocks from the Dow Jones Industrial Average, had a strong performance in 2023. The Dogs of the Dow generated mid-teens growth in 2023, resulting in a total return of 14.5% for the year, nearly catching up to the Dow’s return of 16.0%. At the end of the third quarter, the Dow Dogs’ total return was only 0.4%.
- This return is compared to the average annual returns of ~7.9% for the Dow 30 during the same period.
- In addition, the S&P 500 Index has returned ~7.6% in the same stretch.
- Of course, you and I know that high yields don’t mean a stock is a value—sometimes they just mean a stock is cheap.
An extended bear market hit major benchmarks, with high-growth stocks taking the brunt of the damage. The Nasdaq Composite finished 2022 down 33%, and even the broader S&P 500 index lost 19% on the year. Dow (DOW, $50.07) is in the doghouse, and perhaps well it should be given declines and lumpiness in earnings. However, the company might be forgiven in as much as the chemicals business is cyclical. And if you are waiting for the chemical business to come back, getting paid just over 6% is a tenable position for dogs of the dow 2023 many investors.
The average yield at the start of 2023 was 4.51%, which is more than three times the average of the S&P 500 Index. The 2023 Dogs of the Dow are picked from this list at the end of each calendar year. In addition, it’s invested in the technology to deploy production units, known as “crackers,” so that it can quickly adjust to upstream changes with suppliers and downstream requirements from customers. Net-net, Dow is well-positioned to manage rising costs and feedstock bottlenecks, which may materialize in abundance in the coming year. Transformations of the kind Walgreens is undertaking take time, and in healthcare, they take a lot of time. Getting paid more than 5% to wait might seem prudent, given the macros driving healthcare.
Dividend growth and stock price growth have contributed to its outperformance of the DJIA in some market environments. The Dow Jones Industrial Average gained over 16% in 2023, and the Dogs of the Dow stocks typically offer dividend yields that are much higher than the average dividend yield of the Dow Jones Industrial Average. For example, the current dividend yield of Chevron is 3.5%, while the current dividend yield of Walgreens Boots Alliance is 4.6%.
That makes the Dogs of the Dow 2024 an attractive option for investors who are looking for a safe and reliable way to grow their money. For 2023, some contenders for inclusion in the “Dogs of the Dow” portfolio include Chevron, Walgreens Boots Alliance, Verizon, and Travelers. These companies possess attractive dividend yields and relatively low P/E ratios, indicating their potential for undervalued assets and income generation. The Dogs of the Dow website states since 2000, the strategy has had an average total return of ~8.7% when dividends are reinvested.
Currently, Chevron, Verizon, and Merck are considered to be among the Dogs of the Dow for 2023. While the strategy has historically outperformed the market, it is not risk-free, and investors should conduct their own research before investing. Companies like Chevron, Verizon, and Merck, among others, stand out as attractive investment options within this strategy. The Dogs of the Dow strategy is a popular strategy among long-term investors seeking a steady stream of income. Dividend income can be a valuable source of income for retirees and other investors who need to generate income from their investments. The Dogs of the Dow stocks are typically undervalued and have the potential for capital appreciation in addition to dividend income.
