Dogs of the Dow X Explained • Dogs of the Dow

Back in the mid-1990s, we mentioned that part of the reason for creating this site was to determine if we could get even more out of the Dogs of the Dow. That mission statement, remains at the top of our homepage to this day…

At this site, we intend to inform you of this technique, study its past performance, gauge its current performance, and present you with methods to get more out of the Dogs.

So beginning in the mid-1990s, we began forward testing several Dogs of the Dow variations to see if there was a statistically significant way to outperform the Dow and the Dogs of the Dow.

Over two decades, two major bear markets, and three major bull markets later, we have results.

Introducing Dogs of the Dow X.

One question we asked ourselves back in the mid-1990s was why go with the 10 highest yielding Dow stocks? Is there anything special about the number 10?

Could we increase dividends and overall return by selecting a different number of the highest dividend yield stocks?

Based on over two decades of data, the answer is yes.

So what is the optimal number?

Answer: 7

Selecting the seven highest dividend yielding Dow stocks would have outperformed both the Dow and Dogs of the Dow so far this millennium.

In fact, going with the seven highest dividend yielding Dow stocks (i.e. Dogs of the Dow X), would have added over one percentage point to the average annual total return of the Dogs of the Dow and over two percentage points to the average annual total return of the Dow.

Considering that money managers would give their right arm for this kind of performance — not bad.

So why call it Dogs of the Dow X and not Dogs of the Dow 7?

Flexibility. We will continue to monitor the data as it comes in and want the flexibility to adjust to the optimal number of highest dividend paying Dow stocks.

Is there a Small Dogs of the Dow variation for Dogs of the Dow X?

Yes and we call it Small Dogs of the Dow X. Simple enough.

The Small Dogs of the Dow X are simply the three lowest priced Dogs of the Dow X stocks. That’s it.

Like Dogs of the Dow X, Small Dogs of the Dow X has outperformed both the Dow and the Dogs of the Dow so far this millennium.

Going with the three lowest priced of the seven highest dividend yielding Dow stocks (i.e. Dogs of the Dow X), would have added over three percentage points to the average annual total return of the Dogs of the Dow and over four percentage points to the average annual total return of the Dow.

A couple of caveats…

Back in the mid-90s, we mentioned…

We here at the Dogs of the Dow take no responsibility for the performance of this high dividend yield investment technique. We are simply presenting this technique since it has historically outperformed the stock market as measured by the Dow Jones Industrial Average.

The same is true today.

Back in the mid-90s, we also mentioned…

…there have been periods in which this investment technique has underperformed the Dow as a whole. An investor should be aware that this is a long term investment strategy and no one should expect the Dogs to outperform the Dow each and every year.

The same is true today.

So far this millennium, for example, there have been stretches of as much as a few years whereby the Dogs of the Dow underperformed the Dow.

However, over the entirety of that same stretch, the Dogs of the Dow has outperformed the Dow.

The same goes for Dogs of the Dow X and Small Dogs of the Dow X.

Dogs of the Dow X has some noticeable benefits…

It’s simple. After the stock market closes on the last day of the year, of the 30 stocks that make up the Dow Jones Industrial Average, invest equal portions in the seven stocks which have the highest dividend yield. Then hold these seven Dogs of the Dow X for one year. Repeat these steps each and every year. That’s it!

The same goes for the Small Dogs of the Dow X.

On the last day of any given year, select the seven highest dividend yielding Dow stocks. Of these seven, simply select the three Dogs with the lowest stock price and you will have what we call the Small Dogs of the Dow X. Then get in touch with your broker and invest an equal dollar amount in each of these three high yielding, low priced stocks. Then hold these three Small Dogs of the Dow X for one year. Repeat these steps each and every year.

Dogs of the Dow X is both low cost and low maintenance.

The outperformance of the Dogs of the Dow X and Small Dogs of the Dow X is made more notable by the fact that the stocks which make up this portfolio only need to be readjusted once per year.

Also, stock broker commissions have plunged to $0. Now that’s low cost.

So there you have it.

Dogs of the Dow X and Small Dogs of the Dow X are completely free of charge to our loyal Dogs of the Dow Newsletter subscribers.

It’s our way of saying thank you for supporting us all these years.

We will provide a host of links / resources for Dogs of the Dow X and Small Dogs of the Dow X in each Dogs of the Dow Newsletter. So be sure to check your inbox for the latest.

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