“The Dogs of the Dow,” a popular strategy based on purchasing the highest-yielding stocks each year, is reviewed here using a longer lookback period than originally used, as well as detailed analyses of the risks and rewards. On Beating the Dow, Michael O’Higgins and John Downes outlined two high-yield strategies that achieve substantially greater returns than the Dow Jones Industrial Average (DJIA) with less risk. Here’s a statistical analysis of these strategies, extending the study period back to 1957. The two main strategies to analyze the DJIA are simple. Each year, buy equal dollar amounts of either the 10 DJIA stocks with the highest yield (the “Dogs of the Dow”) or the five lowest-priced of the 10 highest-yielding (the “Flying Five”) and hold for one year. One year later, re-sort the Dow industrials and make any necessary purchases or sales so that you hold equal dollar amounts of the indicated stocks. Total investment time: about 15 minutes a year. |
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