The Dogs of the Dow Are Outperforming Their Index

of the Dow” is one of the simplest dividend strategies to beat the market. Over the coming year, I'll track the Dogs' performance and keep you abreast of news affecting these companies.

The strategy
The Dogs is an investing strategy that buys and holds equal dollar amounts of the 10 best-yielding dividend stocks of the Dow Jones Industrial Average (DJINDICES: ^DJI  ) . The strategy banks on the idea that blue-chip stocks with high yields are near the bottom of business cycle and should do much better going forward. Investors in the strategy then would get not only large dividends but also gains in the stocks underlying those dividends.

High-yield dividends
High-yield portfolios are often dismissed as inferior to their growth counterparts for various reasons:

  • Many people fear that increasing dividend yields mean lower portfolio returns.
  • Others believe that dividend payments mean that management believes the business is done growing.

Evidence from Tweedy, Browne refutes these falsehoods. Research shows that portfolios of high-yield dividend stocks outperform lower-yielding portfolios and the market in general. In fact, a study by noted finance professor Jeremy Siegel found that over 45 years, the highest-yielding 20% of S&P 500 stocks outperformed the S&P 500 by three times! The highest-yielding stocks turned a $ 1,000 investment in 1957 into $ 462,750 by 2002, compared with $ 130,768 if the same money was invested in the .

After beating the Dow by 6.8% in 2011, the Dogs of the Dow underperformed the Dow by 0.2% in 2012. Check out the Dogs' performance in 2013 so far:


Initial Yield

Initial Price

YTD Performance

AT&T (NYSE: T  )


$ 33.71




$ 43.27




$ 20.62


Merck (NYSE: MRK  )


$ 40.94




$ 25.08




$ 44.98


Hewlett-Packard (NYSE: HPQ  )


$ 14.25


General Electric (NYSE: GE  )


$ 20.99




$ 88.21


Johnson & Johnson 


$ 70.10


Dow Jones Industrial Average




Dogs of the Dow



Dogs Return vs. Dow (Percentage Points)



Source: S&P Capital IQ as of March 16.

This week, the Dow Jones Industrial Average rose 0.8%. The Dogs of the Dow rose more than the Dow, up 1.02%. That brings the Dogs of the Dow's outperformance up to 5 percentage points better than the Dow!

Movers and shakers
The biggest mover this past week among the Dogs of the Dow was Hewlett-Packard, which rose 6.28%. On Tuesday it was announced that the U.K. Serious Fraud Office had opened an investigation into HP's accusations of fraud against the former management of Autonomy, which HP acquired in 2011 for $ 10.3 billion. Last year, HP wrote down the acquisition by $ 8.8 billion and accused Autonomy's previous management, including founder and former-CEO Mike Lynch, of inflating Autonomy's results before the sale.

The second biggest mover was Merck, which rose 3.59%. On Tuesday, a medical advisory panel said a large trial for Merck's cholesterol-limiting drug, Vytorin, can continue. Vytorin currently accounts for $ 1.75 billion in annual sales, and Merck hopes those numbers will increase if the study is successful. The nine-year study is scheduled to end next September and is trying to show that Vytorin is significantly more effective than Merck's Zocor, which is now available as a generic.

The Federal Reserve Open Market Committee meets early this week and will have a statement announcing its intentions moving forward on Wednesday at 2 p.m. ET. The Federal Reserve is currently buying $ 85 billion worth of long-term assets every month, and Fed Chairman Ben Bernanke has said that will continue until employment drops to 6.5% (it's currently at 7.7%) or inflation picks up  (it's currently at 0.7%).

While the Dow is hitting all-time highs, Bernanke said in testimony before the Senate last week, “I don't see much evidence of an equity bubble.” With margin debt nearing all-time highs, I disagree with him and lay out my reasoning here.

More dividends
Consider these 10 companies along with the nine names from a new free report from Motley Fool's expert analysts called “Secure Your Future With 9 Rock-Solid Dividend Stocks.” You can access your copy today at no cost! Just click here.

dogs – Yahoo! News Search Results

Rick lends a hand at the Lions Foundation of Canada Dog Guides Training Centre in Oakville, ON.
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    • meepmopp
    • March 17, 2013

    hahaha I LOVe how he states it’s the most prestigious school in Canada…NOT true…. talk to the majority of the blind community and they’ll tell you otherwise.  Also they forgot to mention that the people that go to this school must “pay” or donate to the school to get their dog.

    • starofelo
    • March 17, 2013

    It’s totally joking, they had it planned just to be a comedic skit. Also biscuit didn’t eat it at all, just held it in his mouth, delicious as it was. That’s like asking me to hold a warm chocolate chip cookie in my mouth while i work. I don’t even have that self control, so huge props to biscuit!

    • rm688
    • March 17, 2013

    whish I had a job lined up right after my graduation

    • Suzanne Bowker
    • March 17, 2013

    BTW clients don’t have to pay, or donate to the school, although many will organize a walk or fundraiser after getting their dog, out of their gratefulness for what they have been given. Talk to the graduates, and you will hear how much they appreciate what LF does, and the training of their partner. They graduate MANY vision dogs per year, with people coming back for their 2nd and 3rd dogs. They work with CNIB, who partner with them, on behalf of many clients. They do GREAT work! !!!!

    • Someone4everable
    • March 17, 2013

    I always wonder why not using shelter animals, who are in so much need of a home and are eager to learn. What happens once those 8 years are over, do these animals lose their homes, end up in shelters, are euthanized? Just questions I wish I could know. I know shelter dogs who can do the same thing. But idea of this project is great, but, what about the animals.

    • LRMac99
    • March 17, 2013

    I want that woman’s job who works with the puppies!! My dream job!!!!

    • QueerSwede1
    • March 17, 2013

    I want Biscuit!:)

    • Jim B
    • March 17, 2013

    Could do without the laugh track

    • alnilambr
    • March 17, 2013

    According tho CGDB website, if the owner is able to keep the dog, that’s what often happens, if they can’t, the organization finds homes for them. As for using shelter dogs, I think it could work in some cases, but early socialization is extremely important for guide dogs, to get them used to a variety of thing. Not all puppies who start the program become guide dogs. If you watch the movie Quill (japanese), it gives you an idea of the training/selection program.

    • kubovicrachel
    • March 17, 2013

    Best one ever!

    • Supesfan88
    • March 17, 2013

    I’m a first yr intervenor student at George Brown,we went to the Dog Guide school in December and got to the little obstacle course with Biscuit! Wonderful dog! Wonderful Exposure for the school!

    Take Care!

    • Wakthesmak
    • March 17, 2013

    freaking awesome Rick! 😀

    • LianaGuitarBabe
    • March 17, 2013

    This was a great experience for Mercer and educative to the public. I wish they’d included something to the effect of the general public to NOT patting or distracting the dogs. They get plenty of love and attention from the handler 😉

    • cfoster84
    • March 17, 2013

    We just got our puppy – his name is Fritz and he’s the one in the orange collar. The one thing I picked up on during this broadcast is the fact that we (as Foster parents) dedicate a large portion of our time and money to get these puppies ready for advanced training, but we’ve been discriminated in various locations and prevented from entering some establishments. I ask all that truly care about this program, if you see this, stand up for us and help us educate these businesses! 🙂

    • insidria
    • March 17, 2013

    This is incorrect. I have a Hearing Ear dog from this school, it did not cost me a cent. Once you take your dog home, of course, you are financially responsible for the dog (vet bills, food, etc.). Many other schools do require you to fundraise for your dog, but this one doesn’t. While there are other options in Canada for those who need a canine vision dog, I don’t think there’s any other school in Canada that trains Hearing Ear dog.

    • Sabrina Hill
    • March 17, 2013

    Wicked video.

    • vanislemozartfan
    • March 17, 2013

    It’s filmed in front of a live audience. That’s the audience you’re hearing.

    • canadiensfan2010
    • March 17, 2013

    i love how they went to a pub

    • MotionPictureNation
    • March 17, 2013

    Lions Foundation Dog Guides is a great place and deserves support and recognition. So kudos to Rick and CBC for showing their story.

    • PatBenatarfan90
    • March 17, 2013

    The dogs are bred to do a job & handle being out in public on a daily basis. (I’m not saying no shelter dog could handle SD work but most wouldn’t) These dogs would never be sent to a shelter or euthanized just because they are retiring if the handler can’t keep them they ask the puppy raiser, if not then they they are offered for adoption to the public, either way I assure you they end up in good homes and are loved. My dog will be staying with me after retirement. I wouldn’t give her up.

    • Jonathan Janzen
    • March 17, 2013

    Ahh, that was great. Thanks to the Lions Foundation for all their work. We dream that one day our daughter will have a dog to guide her!

    • IrishEyes1989
    • March 17, 2013

    “Let’s go get daddy a drink. It’s happy hour, Halo!” LOL
    I love Rick!! 😛
    Were those puppies not the cutest?! <3

    • Brenda Falls
    • March 17, 2013

    I worked at Tim Hortons were a gentleman brought his dog in training in when he came for coffee, it was find, how else is the dog to get his training except by doing.

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