Owning the "Dogs Of The Dow" stocks paid off in 2022. And they could be even more lucrative this year.
The so-called Dogs of 2022, the 10 highest yielding stocks in the Dow Jones Industrial Average coming into the year, fell just 1.8% on average in the year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's miles ahead of the S&P 500's nearly 20% drop and much better than the 8.8% drop by the Dow Jones.
But the power of the Dogs didn't stop there. On top of a smaller-than-average stock drop these Dogs Of The Dow yielded 4% coming into the year. That's roughly double the average 2.2% yield of the 30 stocks in the Dow.
Dogs Of The Dow Top The S&P 500
If you don't recall the "Dogs Of The Dow," it's understandable. The technique, popularized in 1991, of buying the 10 highest yielding Dow Jones stocks coming into a new year, fell out of favor amid the megacap tech stock boom.
Adherents of the Dogs strategy assume that the highest yielding Dow stocks are unfairly and temporarily depressed. That presumably means they'll hold up better than the S&P 500. And that seems to be the case in 2022. Adding the Dogs stocks' 4% average dividend yield coming into 2022 plus their average 1.8% drop still left investors with a positive return of more than 2% on the stocks. Additionally, half of last year's Dogs, including International Business Machines, Chevron, Merck, Amgen, and Coca-Cola posted gains in 2022. Chevron alone gained 53% on top of yielding 4.6%.
Contrast that with the 33% drop of the Nasdaq 100 last year.
What are the Dogs for this year, though?
Dogs Of The Dow For 2023?
If you're looking for the Dogs Of The Dow for 2023, there's a strong crop to pick from. Why? Due to falling stock prices, the 10 highest yielding stocks in the Dow now sport an average yield of 4.4%, up slightly from the Dogs' 4% yield going into 2022.
The biggest dog of them all for 2023 is fallen communication services firm Verizon. The company, which has seen its stock drop 24% in 2022, is now yielding more than any other Dow stock: 6.5%. It's important to note, though, there's a reason Verizon's stock is shrinking. Verizon's profit is seen falling nearly 4% in 2022 and nearly 3% in 2023.
What's the next Dog for 2023? Materials firm Dow is yielding 5.5% following an 11.2% drop in the stock this year. It, too, is shrinking its bottom line. Analysts think the chemicals company's profit will sag 28% in 2022 and another 35% in 2023.
Did shares of any of the Dogs for 2023 rise in 2022? Yes, actually three of the 10. IBM returns as a Dog of 2023 despite rising 5.4% in 2022, due to its rich 4.7% dividend yield. Chevron, too, is a repeat Dog with a yield still at 3.3%. And Amgen, following a nearly 17% rise in 2022, is a Dog for 2023 with a yield of 3.3%.
There's absolutely no guarantee the shares of the Dogs will bark again this year. But if high dividends stay in fashion with investors again this year, these stocks will at least have one trait in high demand.
Dogs Of The Dow For 2023
Highest dividend yielding stocks in Dow Jones Industrial Average
| Company | Symbol | Dividend yield | Sector |
|---|---|---|---|
| Verizon Communications | 6.5% | Communication Services | |
| Dow | 5.5 | Materials | |
| Intel | 5.5 | Information Technology | |
| Walgreens Boots Alliance | 5.2 | Consumer Staples | |
| 3M | 4.9 | Industrials | |
| International Business Machines | 4.7 | Information Technology | |
| Chevron | 3.3 | Energy | |
| Amgen | 3.3 | Health Care | |
| Cisco Systems | 3.2 | Information Technology | |
| JPMorgan Chase | 3.0 | Financials | |
| Goldman Sachs | 2.9 | Financials |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
