Insights

Author: David I. Templeton, CFA, Principal and Portfolio Manager

The Dogs of the Dow investment strategy continues its winning streak in 2025. Through the end of November, the year-to-date total return of the Dogs of the Dow equals 20.96%, outpacing the Dow Jones Industrial Average (DIA) return of 13.86% and outpacing the broader S&P 500 Index (SPY) return of 17.74%. In a sign the market seems to be broadening out, two of the top three performing Dow Dogs are health care stocks, Johnson & Johnson (JNJ) and Amgen (AMGN) as seen in the below table. The performance of the Dow Dogs even pretty closely matches the year-to-date return of the Magnificent 7 stocks as noted by the return of the MAGS ETF which is up 22.68%

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As noted in earlier posts, here and here, the Dogs of the Dow strategy is one where investors select the ten stocks that have the highest dividend yield from the stocks in the Dow Jones Industrial Average Index after the close of business on the last trading day of the year. Once the ten stocks are determined, an investor invests an equal dollar amount in each of the ten stocks and holds that portfolio for the entire next year. The popularity of the strategy is its singular focus on dividend yield.

Dividends are an important component in the total return of stocks over the long run. However, simply chasing the highest yielding stocks is not always a wise strategy as the highest yielding stocks may have higher yields as these stocks may be trading at lower prices for a reason, i.e., weakening underlying business fundamentals. In the current environment though, where much of investor focus has been on the artificial intelligence industry, evaluating dividend payers for one's portfolio as diversification may be rewarding from a return standpoint.

Disclosure: Firm and/or family long JNJ, AMGN, VZ, CSCO

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