The Big Picture

2024 has been a great year for the stock market! As of this writing, the Nasdaq Composite is up 29.1%, the S&P 500 is up 23.0%, the Dow Jones Industrial Average is up 12.8%, the S&P Midcap 400 is up 11.7%, and the Russell 2000 is up 9.6%.

There has been a lot for investors to celebrate. Not everything, though, has come up roses. The Dogs of the Dow portfolio, for the most part, has been a real dog.

Stronger Together

The Dogs of the Dow are the ten Dow Jones Industrial Average components with the highest dividend yield. Sometimes those high dividend yields are the result of falling stock prices while other times they are simply a case of a stock having a high dividend yield.

It is a pretty simple process for investing in a Dogs of the Dow portfolio. After the market closes on the last day of the year, identify the ten highest-yielding Dow stocks, and then buy them at the start of the year investing an equal dollar amount in each of the stocks. Hold the stocks for a year and repeat the process at the end of the next year.

A variation of the strategy is to buy the five lowest-priced of the ten highest-yielding Dow stocks. These are called the "Small Dogs of the Dow." Again, one would purchase them at the start of the year, investing an equal dollar amount, and hold them for a year.

The table below provides a snapshot of the 2024 Dogs of the Dow. The Small Dogs of the Dow are in blue.

*Walgreens was replaced in the DJIA by Amazon.com on February 26, 2024

Source: FactSet

Less than Average

The website dogsofthedow.com offers an insightful look at the historical performance of the Dogs of the Dow and the process for carrying out this investment strategy.

Since 2000, the Dogs of the Dow has had an average annual total return of 8.7% and the Small Dogs of the Dow has had an average annual total return of 9.3%, according to dogsofthedow.com. The 2024 Dogs of the Dow portfolio, then, has been worse than average, with an average total return of 2.64% versus a total return of 24.77% for the S&P 500. The Small Dogs of the Dow portfolio has been far worse with an average total return of -9.20%.

Those showings don't show well for the strategy, which evokes the requisite investing reminder that past performance is no guarantee of future results.

For readers interested in this strategy, an early glimpse of a Dogs of the Dow portfolio for 2025 is included in the table below. The Small Dogs of the Dow are in blue.

Source: FactSet

Happy holidays! 

--Patrick J. O'Hare, Briefing.com

(Editor's Note: the next installment of The Big Picture will be the Year in Review on December 31)