"Yet you can do better than just matching the averages. Michael O'Higgins popularized the Dogs of the Dow strategy in his 1991 book . It calls for buying the top 10 highest-yielding dividend stocks from the 30 Beating the Dow Dow Jones Industrial Average companies and has delivered market-beating returns. You hold onto the stocks for one year, then sell them, and start the process all over again. Wash. Rinse. Repeat."
"Because a stock's yield is often inversely related to its recent performance, you naturally buy value stocks that typically offer lower risk and steady income, a powerful combination for producing stellar returns. Other variations such as the Dow 5, call for sorting the 10 Dogs by price from lowest to highest. Additional research found that the highest yielding stock - if it was also the lowest priced one - often was a real dog. It underperformed and dragged down the portfolio's performance."
Index investing offers simplicity and historically strong returns, with the market averaging about 10% annually over the past century. The Dogs of the Dow strategy selects the ten highest-yielding dividend stocks from the 30 Dow components and holds them for a year, aiming to outperform the market by buying value stocks. Because dividend yield often rises as recent price falls, the approach naturally picks lower-risk, income-producing names. A Dow 5 variant ranks those ten by price and may drop the highest-yield, lowest-priced stock when it consistently underperforms, improving returns in many years, including 2025.
Read at 24/7 Wall St.
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