The Dogs of the Dow

The Dogs of the Dow

The Dogs of the Dow is an investment strategy popularized by Michael B. O'Higgins, in 1991 which proposes that an investor annually select for investment the ten Dow Jones Industrial Average stocks whose dividend is the highest fraction of their price.

Proponents of the Dogs of the Dow strategy argue that blue chip companies do not alter their dividend to reflect trading conditions and, therefore, the dividend is a measure of the average worth of the company; the stock price, in contrast, fluctuates through the business cycle. This should mean that companies with a high yield, with high dividend relative to price, are near the bottom of their business cycle and are likely to see their stock price increase faster than low yield companies. Under this model, an investor annually reinvesting in high-yield companies should out-perform the overall market. The logic behind this is that a high dividend yield suggests both that the stock is oversold and that management believes in its company's prospects and is willing to back that up by paying out a relatively high dividend. Investors are thereby hoping to benefit from both above average stock price gains as well as a relatively high quarterly dividend. Of course, several assumptions are made in this argument. The first assumption is that the dividend price reflects the company size rather than the company business model. The second is that companies have a natural, repeating cycle in which good performances are predicted by bad ones.

The Dogs of the Dow were created by data mining. If you look at Dow stocks on January 1 then the high yielding stocks did significantly better than average before 1991 than they did after 1991. The Motley Fool created the Foolish Four which used the square root of the price and dividend in order to create back tested results better than the Dogs of the Dow. All of these methods were dependent on the fact that the stocks picked on January 1 performed better than stocks picked at other times during the period of back testing.

See also


  • Michael O'Higgins and John Downes (2000) Beating the Dow (Revised and Updated). Collins, ISBN 0-06-662047-3

External links

Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • Dogs of the Dow — ist eine Anlagestrategie für Aktien. Sie verfolgt das Ziel, durch die Auswahl von Aktien nach der Höhe der Dividendenrendite eine bessere Performance zu erzielen als der Gesamtmarkt, der durch einen Index abgebildet wird. Inhaltsverzeichnis 1… …   Deutsch Wikipedia

  • Dogs of the Dow — The 10 stocks of the 30 on the Dow Jones Industrial Average with the most depressed prices and consequently the highest yields. The investor buying these stocks speculates that they will bounce back over a one year period. Bloomberg Financial… …   Financial and business terms

  • Dogs Of The Dow — An investing strategy that consists of buying the 10 DJIA stocks with the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks. The strategy… …   Investment dictionary

  • The Motley Fool — Motley Fool Type Private Founded July 1993 Founder David and Tom Gardner, and Erik Rydholm Headquarters …   Wikipedia

  • Dow dividend theory — See: Dogs of the Dow. Bloomberg Financial Dictionary …   Financial and business terms

  • The College Dropout — Studio album by Kanye West Released February 10, 2004 …   Wikipedia

  • The Plague Dogs — infobox Book | name = The Plague Dogs title orig = translator = image caption = First edition cover from 1977 author = Richard Adams cover artist = A Wainwright country = United Kingdom language = English series = genre = Fantasy novel publisher …   Wikipedia

  • The Stones of Summer — infobox Book | name = The Stones of Summer orig title = translator = image caption = author = Dow Mossman cover artist = country = United States language = English series = genre = Novel publisher = Bobbs Merrill media type = Print (Hardback… …   Wikipedia

  • The rise of Jat power — ’ (king) was conferred upon him in 1724. [Dr P.L. Vishwakarma, The Jats, I, Ed Dr Vir Singh, (Delhi:2004), 116] In past Jats always rose against tyranny, injustice, economic and social exploitations and were never overawed by claims of racial or… …   Wikipedia

  • Aftermath of the September 11 attacks — September 11, 2001 was the sole day that defined the first term of President George W. Bush and led to what he has called the Global War on Terrorism , or war against terrorism. The accuracy of describing it as a war and the political motivations …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”