Dogs of the Dow

Written By
Paul Tracy
Updated November 4, 2020

What is the Dogs of the Dow?

"Dogs of the Dow" is a stock-picking strategy whereby an investor buys equal amounts of the 10 highest-yielding stocks within the Dow Jones Industrial Average at the beginning of each year. After every year, the investor updates their holdings to reflect the current highest-yielding stocks in the Dow. 

How Does the Dogs of the Dow Work?

The Dogs of the Dow strategy was popularized in 1991 by renowned money manager, Michael O’Higgins, in his book, "Beating the Dow."

The Dogs of the Do" strategy is based on the idea that the 30 stocks within the Dow Jones Average are generally strong companies with profitable operations. Therefore, investors using this strategy believe the highest-yielding stocks still have strong businesses, but have simply been sold off (hence the term "dog"). With their higher yields and undervalued share prices, these stocks should rise in price faster than other members of the Dow.

However, the strategy also has a number of drawbacks. For example, an investor does little or no research on the companies they're investing in with this strategy. Sometimes even the stable stocks of the Dow sell off because of problems in the underlying business -- the high-yield may actually act as a warning signal.

Why Does the Dogs of the Dow Matter?

Dogs of the Dow represents one of the simplest strategies investors have used to try and outperform the broader market. However, the recession of 2008-09 caused many to question the strategy after Dow components like General Motors saw major losses. Many other components saw high yields from falling share prices that ended with dividend cuts.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Dogs of the Dow.
Be the first to ask a question

If you have a question about Dogs of the Dow, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Dogs of the Dow, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Dogs of the Dow

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms