Bow Wow Wow. Here Come the Dogs of the Dow.

In terms of the Chinese zodiac, 2024 is the Year of the Dragon.

Yet some investors are hoping that it will also be the Year of the Dog… the Dogs of the Dow, that is.

The Dogs of the Dow is an old investing strategy that was popularized — and given a name — by Michael B. O’Higgins in his 1991 book Beating the Dow.

Since then, the Dogs of the Dow strategy has become increasingly popular with investors — even though in some years, it’s not entirely successful.

Unfortunately, 2023 was one of those years.

However, if you believe 2024 will “go to the dogs” — in a positive way, of course — you may want to try your hand at this investing strategy.

Here’s what you need to know.

What Is the Dogs of the Dow Strategy?

The Dogs of the Dow strategy is based on the idea that a large-cap company’s dividend is the most accurate measure of the company’s worth relative to its stock price. Because a company’s dividend yield percentage rises when its stock falls, the stocks with the highest dividend yields can be considered the biggest bargains, according to this line of thinking.

To follow the Dogs of the Dow strategy, at the start of January, investors put an equal amount of money into the 10 stocks in the Dow Jones Industrial Average (DJIA) with the highest dividend yields on the last trading day of the previous calendar year. They then hold onto these stocks until the end of the year.

When December rolls around, investors must decide whether or not to stick with the strategy. If they decide to keep using the Dogs of the Dow strategy, they rebalance their portfolio at the start of the New Year to invest equally in the next set of 10 blue-chip Dogs of the Dow stocks.

It’s a simple strategy, which probably accounts for its popularity.

How Did the Dogs of the Dow Perform in 2023?

Last year, the 10 Dogs of the Dow underperformed the DJIA. This was the fourth time in five years that the strategy hasn’t beaten the Dow as a whole.

Here’s how last year’s Dog stocks performed (calculated by using each stock’s open price on January 3, 2023, and adjusted closing price on December 29, 2023):

By comparison, the DJIA saw gains of nearly 14% in 2023.

After 2023’s focus on artificial intelligence (AI) and high-growth stocks, investors are hopeful that 2024 will see a return of value stocks such as those included in the Dogs of the Dow index.

What Are the Dogs of the Dow for 2024?

This year, two stocks — Intel (NSDQ: INTC) and JPMorgan Chase (NYSE: JPM) — have dropped off the Dogs of the Dow list.

Intel in particular had a great 2023, nearly doubling investors’ money. That’s due largely to the buzz around AI technology that benefited chipmakers, including INTC, which had been lagging behind rivals such as Nvidia (NSDQ: NVDA) and Advanced Micro Devices (NSDQ: AMD).

In addition, JPMorgan was able to overcome the challenges posed by the mini-banking crisis at the start of 2023 to hand investors gains north of 25%. That took this bank stock out of the doghouse.

For 2024, there are two new Dogs of the Dow to take their place: Coca-Cola (NYSE: KO) and Johnson & Johnson (NYSE: JNJ). The former has been losing ground as investors fear consumers will curtail their junk-food purchases due to inflation. The latter has been set back by the spinoff of its consumer products business, Kenvue (NYSE: KVUE), along with a variety of lingering worries.

Here are the 2024 Dogs of the Dow:

The Bottom Line

The Dogs of the Dow is a popular, easy-to-understand investing strategy that aims to show investors improved returns vs. the Dow Jones Industrial Average. While that isn’t always the case, investors are betting that 2024 will be a good year for the Dogs of the Dow.

At any rate, the stocks included on the list are — for the most part — legacy blue-chip stocks whose businesses are relatively healthy and that pay out steady dividends.

However, if you want to super-charge your portfolio, I suggest you also consider the advice of our colleague Jim Pearce, chief investment strategist of Personal Finance.

Personal Finance, founded in 1974, is Investing Daily’s flagship publication. This year, it celebrates 50 years of helping investors build wealth.

Case in point: If you had taken the initial recommendation of Personal Finance to buy Chevron, and held on, you’d be sitting on a whopping return of nearly 3,200% (that’s not a typo).

Want to get aboard “The Next Chevron?” Click here for details.