Dogs Of the Dow - High Dividend Yield Blue Chip Stocks

This is the most famous mechanical stock picking strategy. The idea of the dogs of the dow is to buy blue chip stocks after they've been beaten down in price.

The focus on blue chips is to ensure they have a higher chance of recovering.

"Beaten Down" is measured with a high dividend yield. In reality, the strategy will also include stocks that always offer a good yield and therefore may be bought without necessarily experiencing important drop in price.


Dogs of the Dow screens

The main strategies are:
  • Dogs Of the Dow: Sort the 30 Dow Stocks by high dividend yield and buy the top 10. Keep for 1 year and rebalance.

  • Small Dogs Of the Dow: From the above 10 highest yielding Dow stocks, perform a 2nd Ranking on Price and buy the 5 lowest Priced.

illustration of the Dogs of the Dow main strategies

The following table summarizes the strategies with an alternative for the Small Dogs of Dow that ranks the stocks by high Dividend/(Price^2) which is same as Dividend Yield/Price. It should provide similar results than the Small Dogs.

Screening Theme Dogs of the Dow Small Dogs of the Dow
Investing Universe Dow Jones Index Dogs of the Dow Dow Jones Index
Primary Theme      
Secondary Theme(s)      
Ranking Dividend Yield Lowest Price Dividend Yield/Price
Number Of Holdings 10 5 5
Holding Period 1 year1 year 1 year


The dogs were first featured by Michael O'Higgins in Beating the Dow.

The rationale behind the small dogs is that lower priced stocks are more volatile. Since we buy those stocks when they have potentially been beaten down, the next big move should likely be up and we don't mind more volatility on the up side. In addition, lower price could be another sign of a beaten stock.

If you have MSN Deluxe Stock Screener installed (Free), you can click on the following links to get the list of current dogs: Dogs of the Dow, Small Dogs of Dow.


Dogs of the Dow Performances Go back to Top

James O'Shaughnessy provides one of the longest backtest in What Works on Wall Street: from December 1928 to December 2003, the Dogs returned 14.3% average annual (12.2% annualized) outperforming the S&P500 that returned 11.7% average (9.7% annualized).

This web site provides returns for many variations from 1972 to 2005: check Dow Dividend strategy historical returns. Dividends are excluded from the returns so most strategies should perform even better since they invest in higher dividend yielding stocks. (Note: The "Dogs of the Dow" is called High10 while the "Small Dogs of the Dow" is called BTD for Beat the Dow).

An interesting result is that the High5 (the 5 highest yielding Dow stocks) does not outperform the High10 (it is likely that this is still the case after dividends are factored in). This means that there is a point of diminishing return where too much filtering deteriorates the performances. As in any mechanical stock picking, pay great care with too few holdings. In addition, strategies with 5 stocks are definitely more volatile: you can reduce the volatility with Market Timing (see below).

Mark Vakkur also provides yearly performances for the 2 main strategies from 1957 to 2000: check Dogs of Dow historical Returns. You can see that they outperform the market in almost any 10 years period. This finding is also highlighted by O'Shaughnessy.


Overall, the strategy has passed the test of time. Now, the returns are not as high as many other value strategies. This is a general observation: value investing strategies focusing on high dividend yield typically underperform strategies using other valuation criteria such as Low Price/Sales, Low Price/Earnings ratio...

Dogs of the World Go back to Top

The Dogs of the Dow - like most mechanical stock picking strategies - works world wide.

If you are an international investor or a US investor investing in overseas high yield stocks, just type in "Dogs of the AAA" in the following Search Box.

Replace AAA by the main index of the country you want to invest in. For instance: FTSE for UK, CAC40 for France, TSE for Canada, ASX for Australia, Hang Seng for Hong Kong...

Chances are that the top ranked web sites will provide you with the list of your country's current "Dogs" or more info on local high dividend yield strategies. It works for virtually every developed countries and many emerging countries (Sensex for India...).

The search is powered by Google and is optimized to feature Investing web sites so should be more relevant than if you use a standard Google Search.

Dogs of the Dow with Market Timing Go back to Top

It is possible to combine the Dogs of the Dow with Market Timing.

O'Higgins created Beating the Dow with Bonds: invest in the Dogs if the market is not overvalued, in bonds otherwise.

O'Higgins and Larry Williams - separately- backtested the Dogs of the Dow (the 5 highest yielding stocks only) with the Best 6 Months (November to April) timing strategy: check Value Investing and the Best 6 Month Market Timing. Performances are slightly diminished but the main benefit of market timing is a great reduction in volatility as you're invested only during 6 months per year: overall Sharpe ratio (or reward/risk ratio) is greatly improved.

Finally, Larry Williams proposed an interesting combination in the Right stock at the Right time:
  • From October to April: invest in the Dogs of the Dow (5 highest yielding Dow stocks),


  • From April to October: invest in the Dogs of the Dow Utilities (5 highest dividend yield stocks from the Dow Jones Utilities)
    • . The Utilities are safer during the worst 6 investing months of the year.

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