The stock market is a forward-looking entity, and because it is, you'll be hearing more reports about the Dogs of the Dow investment approach.
In its most basic form, the Dogs of the Dow approach is an investment process whereby one purchases the 10 highest yielding Dow stocks at the start of the year, allocating the same amount of money to each stock. That basket of stocks is then to be held for the duration of the year. At the beginning of the following year, it is replaced with a new basket of Dow Dogs.
There are variations to the Dogs of the Dow approach. One popular variation is to buy the five lowest priced of the ten highest yielding stocks and to use that as your basket of dogs. Presumably, the low-priced stocks already reflect the bulk of bad news that contributed to their depressed standing and provide greater potential for outperformance.
While there are still a few weeks left in the year, the table below offers a snapshot of the current frontrunners for a Dogs of the Dow portfolio for 2008. We will provide the final list after the close on December 31.
| Stock | Current Price | Dividend Yield |
|---|---|---|
| Citigroup (C) | 31.24 | 6.91% |
| Pfizer (PFE) | 23.10 | 5.02% |
| Altria Group (MO) | 77.24 | 3.89% |
| AT&T (T) | 41.25 | 3.89% |
| Verizon (VZ) | 44.67 | 3.87% |
| General Motors (GM) | 26.50 | 3.78% |
| DuPont (DD) | 45.16 | 3.66% |
| JPMorgan Chase (JPM) | 45.00 | 3.40% |
| Home Depot (HD) | 26.86 | 3.35% |
| General Electric (GE) | 37.33 | 3.34% |
Note: Merck (MRK), with a dividend yield of 2.54%, is the next highest yielder after GE.
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