The strategies are based on the Dow Jones Industrial Average stocks (The Dow). The Dow is made up of 30 “blue chip” stocks which are among the most closely followed and widely owned stocks in the world. The Dow stocks represent approximately one quarter of the total value of all stocks traded on the New York Stock Exchange.

The Dogs of the Dow are the stocks with the highest dividend yield among the thirty companies that comprise the Dow. These strategies select groups of “out of favor” Dow stocks that are likely to rebound in the next year. The stocks chosen are the ones with lowest prices relative to the dividend paid, indicating these stocks are “out of favor.” Following are the three Dogs of the Dow strategies that we provide.

The High Yield 10 approach selects the ten Dow stocks with the highest yield and holds them for one year. At the end of the year, it sells any stocks not still on the top ten list, and replaces them with the new highest yielding stocks. Using The High Yield 10 approach, $10,000 invested in 1970 would be worth over $640,000 by January 1st 1997. This results in an annual return of 17.3%. The High Yield 10 system has been used for the past 26 years. During those years, the approach lost value only twice, the worst of which was a 10% loss during the 1990 recession.		The Preferred Five approach uses five stocks. Each stock represents 20% of the portfolio. If the lowest priced stock is also the highest yield, it is eliminated and the stock ranked number six is added. This approach resulted in a 19.7% annual return between 1971 and 1997. With such a concentrated portfolio, a strong stock can significantly improve the value of your portfolio. Similarly, a weak stock can significantly weaken the value of the portfolio. This approach has resulted in higher returns than the High Yield 10, but is more risky. This approach has only had three losing years in a 26 year study. The worst loss was 17% in 1990 which was followed by a 59% gain in 1991.
This approach refines the Dogs of the Dow even further. It combines the lower priced high yielding stocks of the Dow 10 with certain restrictions. The same $10,000 invested at the beginning of 1971 would have grown to $1.75 Million by January 1 1997. That compounds to an annual growth rate of just under 22%.