Dogs of the Dow | Beating The Dow with Stocks | Stock Pick
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The markets are very volatile lately (2008), but the standing principle is still valid.
Major companies go through cycles. The theory is that high yield is the real indication of the strength of the company.
Since companies go through cycles, a company with low stock value and high yield compared to other dow dogs, is bound to turn around and go back up.
Buying low price, high yield stocks provides the opportunity to own stocks that have a good chance to go up, while acquiring more shares through dividend reinvestment.
Disclaimer: There is no guarantee when picking stocks. I present this system as one potential way to pick stocks. Despite the track record of this system, past results in no way determine future results. Invest wisely.
Introduction to Dow Dogs
To make things easy, I posted the closing stock figures for April 22, 2008. You don't have to check figures every day, but once a month to once every quarter is sufficient to make changes.
Everything that follows shows figures and picks for 2008. I have added a link above for 2009 for more current picks.
Starting 30 Dow Jones Industrial Average Components
9998 characters ;)
Symbol
Company
Stock Price
Yield
C
Citigroup
$25.11
5.10%
PFE
Pfizer
$20.47
6.25%
GM
General Motors
$20.13
4.97%
MO
Altria
$22.10
5.25%
VZ
Verizon
$36.03
4.77%
T
AT&T
$37.51
4.27%
DD
DuPont
$52.02
3.15%
JPM
JP Morgan Chase
$45.76
3.32%
GE
General Electric
$32.69
3.79%
HD
Home Depot
$28.68
3.14%
MRK
Merck
$39.76
3.82%
MCD
McDonald\'s
$58.30
2.57%
JNJ
Johnson & Johnson
$66.51
2.50%
MMM
Minnesota Mining & Manufacturing
$82.90
2.41%
KO
Coca-Cola
$60.11
2.53%
CAT
Caterpillar
$85.28
1.69%
PG
Procter & Gamble
$67.17
2.38%
AA
Alcoa
$36.26
1.88%
WMT
Wal-Mart
$56.31
1.69%
BA
Boeing
$78.66
2.03%
INTC
Intel
$22.55
2.48%
UTX
United Technologies
$72.51
1.77%
HON
Honeywell
$60.99
1.80%
XOM
ExxonMobil
$94.00
1.49%
IBM
International Business Machines
$124.40
1.29%
AXP
American Express
$45.53
1.58%
AIG
American International Group
$48.23
1.66%
MSFT
Microsoft
$30.00
1.47%
DIS
Disney
$31.33
1.12%
HPQ
Hewlett-Packard
$48.18
0.66%
Picking Dow Dogs in 2008 - Easiest Method
This sample uses the Dow Dogs from April 22, 2008. For the current Dow Dogs, please continue to Current Dow Dogs Picks.Step 1: Select the 10 highest yields for the table above. These stocks are the ones that will have the best returns if the stock does nothing, and more importantly, they indicate companies that show the best potential for success. I have selected the highest *11* stock yields, because the last 2 are off by .01% and since share price makes a difference, I thought it was relevant.
Step 2: Select the least expensive stocks from the highest yielders.
Step 1 yields the following 11 stocks.
Symbol
Company
Stock Price
Yield
C
Citigroup
$25.11
5.10%
PFE
Pfizer
$20.47
6.25%
GM
General Motors
$20.13
4.97%
MO
Altria
$22.10
5.25%
VZ
Verizon
$36.03
4.77%
T
AT&T
$37.51
4.27%
DD
DuPont
$52.02
3.15%
JPM
JP Morgan Chase
$45.76
3.32%
GE
General Electric
$32.69
3.79%
HD
Home Depot
$28.68
3.14%
MRK
Merck
$39.76
3.82%
(Table format from SquidUtils developed by thefluffanutta).
Of these, pick the 5 lowest priced stocks.
Of these, they are Citigroup ($25.11), Pfizer ($20.47), General Motors ($20.13), (Altria $22.10) and Home Depot ($28.68). Note that Home Depot is the 11th stock based on the step 1 criteria, but it is the 5th cheapest of the 11. If you were to pick the 5th cheapest stock from the actual 10, you would replace Home Depot with General Electric ($32.69). GE has a much higher yield and qualifies with a strict select 10 from step 1, but Home Depot has a lower stock price, allowing more shares in a less strict select 10 from step 1. Either is a rational pick.
Under the easiest Dow Dogs system, the 5 stocks you would buy at the time these numbers came out would be:
C
PFE
MO
GM
HD or GE
Disclaimer: There is no guarantee when picking stocks. I present this system as one potential way to pick stocks. Despite the track record of this system, past results in no way determine future results. Changes to which stocks to by don't necessarily mean that you would sell your old stocks. It simply means that the opportunity to buy new stocks has arisen.
Notice: These are not the current Dow Dog picks. See below.
Current Dow Dogs Picks
Updated June 25, 2010
To reflect the changing views of the market, I will update Dow Dogs picks more regularly.Changes reflect what are the best picks by the Dow Dogs simple method at the current time. It is not necessarily a plan to sell existing shares, only to buy more shares that are deemed the best opportunity.
Note: Due to the craziness of the 2008 market, I'm still selecting stocks based on the program, but results will probably still be down for the year based on a variety of factors.
Symbol
Company
Price
Yield
T
AT&T
24.79
6.78%
VZ
Verizon
28.55
6.65%
DD
DuPont
36.66
4.47%
PFE
Pfizer
14.64
4.92%
MRK
Merck
35.93
4.23%
KFT
Kraft
29.33
3.95%
CVX
Chevron
70.06
4.11%
MCD
McDonald's
67.42
3.26%
KO
Coca-Cola
50.26
3.50%
JNJ
Johnson & Johnson
58.70
3.68%
Penultimate Profit Prospect - The Winner of the Dow Dogs
Michael O'Higgins makes a big deal about the Penultimate Profit Prospect (PPP). The PPP is the second-cheapest high yield stock selected in Step 2. In the original sample at the top, this would be Pfizer (PFE) at $20.47 and 6.25% Yield.Mr. O'Higgins goes on to show in his book Beating the Dow, the results he has had with the PPP.
He has seen profits with all ten high yielders, the 5 high yield/low pricers and the PPP from 1973 through 1998. Although the ten high yielders are impressive with a return of 7264%(!), and the 5 stock system is made clear with a return of 13279%(!!), the PPP had a staggering return of 43177%(!!!) over 26 years.
Does this mean that you should only invest in the PPP? No. You cannot put all your eggs in one basket, and O'Higgins doesn't suggest it. The point is that there is something special about this position, and having it in your portfolio will help, and perhaps shore up worse picks in the group of 5.
Remember, this system doesn't guarantee results, it just selects them.
Books About Beating the Dow by Michael B. O'Higgins
Read more about why his systems have become successful.
Dow Dogs Website
I go to the source.
Dogs of the Dow
Get more information and figures, sign up for his newsletter and more.
Dogs of the Dow in the News
- Introducing Top Market Cap Dividend Dogs
- Every day at market close, the Dogs of the Dow website updates a list of the "50 largest companies by market cap (available on major US stock exchanges)". The website defines market cap as "the total market value of the company's outstanding shares.
- A Detailed Overview Of The Best Dogs Of The Dow Jones In May 2012
- One popular and much discussed strategy is the Dogs of the Dow theory by Michael O'Higgins. The strategy is to buy 10 stocks of the Dow Jones with the highest dividend yield and lowest price to earnings ratio at the beginning of the year and to hold ...
- Kraft Foods - A Forgotten Dog Of The Dow
- Kraft Foods (KFT) is one of the forgotten Dogs of the Dow for 2012. The stock has not moved much from the start of the year, opening 2012 at $37.95, reaching a high of $39.99 on May 1st and now sitting in the high $38 range. With a dividend of $1.16 a ...
- U.S. stocks bounce back; Dow up, tech dogs Nasdaq
- SAN FRANCISCO (MarketWatch) -- US stocks made a late-day reversal Thursday as traders ran with the latest headlines from Europe, including comments from Italian Prime Minister Mario Monti that he expected Greece to stay in the euro zone. The Dow Jones ...
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Discuss Dow Dogs
Talk about the system, Mr. O'Higgins books or share your own system and tips.
Also, please be sure to rate and favorite this lens. Thanks!
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Unconventional-Wisdom Mar 24, 2010 @ 2:08 pm | delete
- I'm a fan of the Dow Dogs. This lens has been added to my featured lenses module on a random rotating basis. You'll find it at squidoo.com/My-Experience-with-An-Online-Stock-Broker. Thanks and keep up the good work.
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JHFSEO
Apr 8, 2009 @ 6:53 pm | in reply to JHFSEO | delete
- Further clarification from the last comment.
mjr1 wanted to correct the figure I posted based on his copy of Beating the Dow and quoted me as saying it was over a 15 year period. What I originally wrote was "1973 to 1988" which I mistyped when I intended to enter "1973 through 1998" as is written on page 202 of the 2000 copy. I have corrected this oversite above where it appears on the lens.
mjr1 may very well be right that his figures are accurate from 1973 to 1988 as I had originally typed incorrectly. Without the 1992 copy I won't know for sure. Still, this typo is the reason for the 11 year discrepancy and thank you to mjr1 for pointing it out.
Again, I still intend to make a table of Mr. O'Higgins results year by year.
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JHFSEO
Apr 8, 2009 @ 6:46 pm | in reply to mjr1 | delete
- I was quoting accurately, but off on the details.
The figures I quoted are printed in the 2000 version of his book on page 202. Those figures were for the period from 1973 through 1998 - 26 years. I claimed those figures occurred over a period of 15 years which was incorrect, but he does claim these amazing returns over that 26 years period. In the near future, I will scan and display the page from the 2000 copy so that you can see what I am seeing.
I am not familiar with the 1992 copy, but will try to find it to incorporate what you see in your copy. What I should do is create a table showing his returns year by year, to better show the ups and downs of the market as he has used the system.
Thanks for the clarification.
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mjr1
Jan 2, 2009 @ 9:30 am | delete
- I believe the info you state above regarding the % increases for the Dogs of the Dow are inaccurate. This is what you listed above: "He has seen profits with all ten high yielders, the 5 high yield/low pricers and the PPP from 1973 to 1988. Although the ten high yielders are impressive with a return of 7264%(!), and the 5 stock system is made clear with a return of 13279%(!!), the PPP had a staggering return of 43177%(!!!) over 15 years."
The returns that are posted in the book "Beating The Dow" are 1,753.14%, 2,819.41% and 6,245.49% respectively. If you know something I don't, please let me know. This is on page 191 of the paperback "Beating The Dow" published in 1992.
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JHFSEO
Oct 26, 2008 @ 6:45 pm | in reply to ArtSiren | delete
- My father turned me on to his books a while ago, and the heart of his system is research into the underlying financial information of the companies. Although the surface is certainly about recovery plays, deep down he has researched the companies from which he chooses.
I wish he'd write a book just on the current and former DJIA stocks. I'm sure it would be a good read.
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JHFSEO
Oct 12, 2008 @ 10:39 am | delete
- Ford, GM and Chrysler have another complication...They're all looking to merge. Ford staved off GM who was interested in merging just last month, and now GM is looking at Chrysler, which after being gutted in the divorce with Daimler, doesn't even have common stock. All of this while both Ford and GM consider selling off brands they've picked up.
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seolenz
Sep 23, 2008 @ 7:55 pm | delete
- Sorry here is my question:
How do the talks of a Major Bailout in the motor industry effect GM, and other big players in the motor industry?
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seolenz
Sep 23, 2008 @ 7:53 pm | delete
- My question is, what does the talk of a
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tdove
Aug 26, 2008 @ 6:49 pm | delete
- Thanks for joining G Rated Lense Factory!
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Aug 4, 2008 @ 10:48 pm | delete
- I always catch O'Higgins's appearances as market monitor on Nightly Business Report. You have to pay attention to original thinkers.
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by JHFSEO
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