Dogs of the Dow
by
Gregory Grant
As every investor knows, the Dow Jones is composed of an average of thirty of the best-known stocks in America, with some of the highest profile companies being represented. Among these stocks is a group of 10 with an unusual name that may be the worst performers of the 30, but pay the highest dividends. Many believe this group is a wise buy.
"You hold them for a year and then the following year buy the 10 highest dividend paying stocks," says Mitch Slater of Merrill Lynch. "They came up with the name 'Dogs of the Dow' because you are buying 10 of the 30 Dow Jones stocks that were the worst performers during the previous year hence, they're in the 'Doghouse' so they're the 'Dogs' of the Dow."
But some of these so-called dogs pay hefty dividends and can become an important part of an investment portfolio. It's one that any investor can incorporate into their investing plan.
"The best part about it, is that it's so simple anyone can do this strategy, you don't have to be Warren Buffett, you don't have to be Bill Gates to do this strategy," says Slater. "Dow Jones Industrial average, 10 stocks, highest dividend, every year, end of game."
As an investment strategy, buying the 10 least performing but highest dividend payers of the Dow and then holding on to them for a year, might keep many an investor out of the doghouse.
In recent years, companies have flocked to the web to set up dot.com sites. Initially retail companies caught the attention of investors and consumers alike.
When to sell a stock is as important as when to buy a stock. The investor that goes beyond just looking at the financial pages will find that this kind of in-depth research will pay off in helping to make wiser investment choices.