In case you haven’t heard the term used before, Dogs of the DowDogs of the Dow simply involves buying the top 10 highest-yielding stocks on the Dow Jones Industrial Average (DJIA) that were down the most in the year prior. Investors buy the Dogs of the Dow on the first of a new year and exit at the end of the year. The goal with such a strategy of using the Dogs of Dow is to beat the returns of the Dow Jones Industrial Average (DJIA) on a yearly basis.

While Dogs of the Dow strategy has been referred to as outdated, the Dogs still have plenty of investor tails wagging at the end of the year.

Granted, 2020 wasn’t so hot thanks to the pandemic. However, most times, the strategy has worked out well. In 2019, for example, the Dogs of the Dow returned an average win of 20%. In 2018, the average return for the Dogs of the Dow was up 1%, as the Dow Jones Industrial Average fell nearly 6%. In 2017, the Dogs of the Dow returned 17%. In 2016, the Dogs of the Dow returned an average gain of 16%. Along with those returns, investors received dividends, too.

How the Dogs of the Dow Strategy Works

At the end of every year, investors simply buy the top 10 highest-yielding stocks on the Dow that fell out of favor. By year-end, investors cash out and repeat the process.

For 2021, for example, here’s how the Dogs of the Dow have performed to date:

• Chevon (CVX) ran from $81 to about $95, with a dividend yield of 5.66%
• IBM (IBM) ran from $119 to $135, with a dividend yield of 4.88%
• Dow (DOW) ran from $52 to $56, with a dividend yield of 4.85%
• Walgreens (WBA) ran from $39 to $49, with a dividend yield of 3.91%
• Verizon (VZ) fell from $57 to $54.51, with a dividend yield of 4.7%
• 3M (MMM) ran from $167 to $181, with a dividend yield of 3.26%
• Cisco (CSCO) ran from $43 to $56, with a dividend yield of 2.64%
• Merck (MRK) fell from $75 to $72, with a dividend yield of 3.6%
• Coca-Cola (KO) fell from $51 to $54, with a dividend yield of 3.1%
• JP Morgan (JPM) ran from $123 to $153, with a dividend yield of 2.35%

To date, eight out of the 10 Dogs of the Dow performed well. In addition, investors were able to collect dividends just for holding each stock—so much for the strategy being outdated!

Remember, at the close of every year, simply buy the top 10 highest-yielding stocks on the Dow that seem to have lost their popularity. By year-end, cash out, and repeat for the next year.

It’s one of the easiest dividend strategies to follow.