2022 was a horrible year for most stock investors. An extended bear market hit major benchmarks, with high-growth stocks taking the brunt of the damage. The Nasdaq Composite finished 2022 down 33%, and even the broader S&P 500 index lost 19% on the year.
By that standard, the 9% loss in the Dow Jones Industrial Average (^DJI -0.18%) was a relatively good performance. Yet those who narrowed their look at Dow stocks to focus on top dividend payers in the popular index fared even better, as the strategy known as the Dogs of the Dow made money in 2022.
Image source: Getty Images.
The success of the Dogs of the Dow has a lot of investors taking a closer look at the strategy to see if it can keep outperforming in the coming year. Without further ado, here are the 10 stocks that will comprise the Dogs of the Dow for 2023, along with an explanation of the strategy behind them.
The 2023 Dogs of the Dow
Stock | Dividend Yield | Rank in 2022 |
|---|
Verizon | 6.62% | 2 |
Dow Inc. | 5.56% | 1 |
Intel | 5.52% | 10 |
Walgreens Boots Alliance | 5.14% | 5 |
3M | 4.97% | 8 |
IBM | 4.68% | 3 |
Amgen | 3.24% | 7 |
Cisco Systems (CSCO 1.23%) | 3.19% | - |
Chevron | 3.16% | 4 |
JPMorgan Chase (JPM 0.19%) | 2.98% | - |
Source: DogsoftheDow.com.
How to follow the Dogs of the Dow strategy
The primary benefit that investors get from using the Dogs of the Dow strategy is that it takes almost no time to set up and maintain. At the beginning of the year, you just have to take a look at the 10 Dow stocks that finished the previous year with the highest dividend yields. Then you invest equal amounts in each of the stocks.
That's all it takes, and there's nothing more to do until the end of the year. At that point, you can either close out the strategy or continue into the next year. If you choose to keep investing in the Dogs of the Dow, you'll need to replace any stocks that are no longer among the 10 highest-yielding Dow dividend stocks and purchase shares of any new stocks on the list. You'll also need to rebalance your holdings of stocks that stay on the Dogs list to get back to equal weightings.
Out with the old, in with the new
You can see the value emphasis in the Dogs of the Dow strategy from the dividend stocks that joined and left the list in 2023. Merck (MRK -0.40%) had a huge year, with its stock jumping 45% as prospects for several of its approved and pipeline drugs improved dramatically in 2022. The soaring share price sent Merck's dividend yield down almost a full percentage point. Similarly, Coca-Cola (KO 0.14%) stock rose 8% on strong investor appetite for consumer staples stocks.
By contrast, both stocks new to the Dogs fared poorly in 2022. Cisco Systems (CSCO 1.23%) got caught up in the tech downturn, and even though its 25% drop was small compared to those of many of its peers, it was enough to boost its dividend yield nearly a percentage point to 3.2%. Similarly, JPMorgan Chase (JPM 0.19%) shares suffered when a combination of rising interest rates and the tough market environment for investment banking dealt the financial giant a double whammy.
Will 2023 be another great year for the Dogs of the Dow?
The Dogs of the Dow strategy produced a price change of -1.8%, beating the Dow's performance by about 7 percentage points. Moreover, when you add the roughly 4% yield that the Dogs of the Dow paid, they saw their return move into positive territory at around 2%. It was the first year since 2018 that the Dogs outperformed the Dow Jones Industrials.
There's a lot of uncertainty about how 2023 will go for stock investors. Fears of a recession have many investors gravitating toward value and dividend stocks once again. At some point, though, growth stocks will rebound.
Yet for some investors, the prospect of owning solid stocks with an average dividend yield of 4.4% is too good to pass up. Regardless of whether the Dogs of the Dow outperform the stock market in 2023, many will find that the simple strategy gives them an easy way to get market exposure without a lot of hassle.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dan Caplinger has positions in JPMorgan Chase. The Motley Fool has positions in and recommends Cisco Systems, Intel, JPMorgan Chase, and Merck. The Motley Fool recommends 3m, Amgen, and Verizon Communications and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2024 $47.50 calls on Coca-Cola, long January 2025 $45 calls on Intel, and short January 2025 $45 puts on Intel. The Motley Fool has a disclosure policy.
FAQs
The Dogs of the Dow 2021 recorded a gain of 25.3% compared to 21% for the Dow Jones 30 index. The Dogs of Dow 2022 recorded a gain of 2.2%, outperforming the Dow Jones 30 index which lost -8.8%. The Dogs of Dow 2023 recorded a gain of 10.1% which was lower than the 14.4% gain on the Dow Jones index.
How did Dogs of the Dow do in 2023? ›
The Dogs of the Dow 2021 recorded a gain of 25.3% compared to 21% for the Dow Jones 30 index. The Dogs of Dow 2022 recorded a gain of 2.2%, outperforming the Dow Jones 30 index which lost -8.8%. The Dogs of Dow 2023 recorded a gain of 10.1% which was lower than the 14.4% gain on the Dow Jones index.
What are the 10 stocks to buy according to The Motley Fool? ›
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short March 2024 $67.50 calls on PayPal.
Do the Dogs of the Dow strategy work? ›
Though the Dow of Dogs has slightly underperformed the DJIA in the past 10 years, it still works as a good dividend strategy if investors are looking for fixed payments in their portfolio.
What is the average annual return of the Dogs of the Dow? ›
Since 2000, the Dogs of the Dow has had an average annual return of 9.5% and the Small Dogs of the Dow has had an average annual return of 10%, according to dogsofthedow.com. Below are the 10 Dow stocks that qualify for a 2022 Dogs of the Dow portfolio with price/yield indications (the "small dogs" are in red):
What are the worst performing stocks of 2023? ›
SolarEdge, Plug Power, Moderna, and Pfizer are among the year's biggest losing stocks. Overall, 2023 was a great year for stocks, as the markets rallied to near-record highs in late December.
What will the Dow Jones be in 2024? ›
The updated Dow Jones price prediction for the next 5 years is for the index to trade around 45,000 points. Long Forecast predicts Dow Jones to trade at 39071 points in the first month of 2024 and and advance up to 48,000 points by the end of the year.
What is the Motley Fool's top ten stocks in 2024? ›
See the 10 stocks
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short March 2024 $67.50 calls on PayPal.
What stock will make me rich in 2024? ›
2024's 10 Best-Performing Stocks
| Stock | 2024 return through March 31 |
|---|
| MicroStrategy Inc. (MSTR) | 169.9% |
| SoundHound AI Inc. (SOUN) | 177.8% |
| Vera Therapeutics Inc. (VERA) | 180.4% |
| Avidity Biosciences Inc. (RNA) | 182% |
6 more rowsAmazon (AMZN): When it's all said and done, AMZN stock will hold a large market share of the generative AI market. Netflix (NFLX): Operating margin is expected to expand by 520 bps in Q1 FY24 for the streamer. Spotify (SPOT): The streaming music company anticipates 16 million net new MAUs in the first quarter of 2024.
A Dogs of the Dow ETF? There's no ETF that explicitly utilizes the Dogs of the Dow strategy, but there is one that comes close: the innocuously named Invesco Dow Jones Industrial Average Dividend ETF (DJD). With just over $300 million in assets under management, this ETF is one of the smaller ones in Invesco's lineup.
What are the Dogs of the Dow 2024? ›
In 2024, the 10 Dogs of the Dow and their current dividend yields are:
- Verizon (NYSE: VZ): 6.8%.
- 3M (NYSE: MMM): 5.6%.
- Dow (NYSE: DOW): 5.3%.
- Walgreens (NASDAQ: WBA): 4.6%.
- Chevron (NYSE: CVX): 4.3%.
- IBM (NYSE: IBM): 3.9%.
- Coca-Cola (NYSE: KO): 3.1%.
- Cisco (NASDAQ: CSCO): 3%.
What moves the Dow Jones price?
- Monetary and economic releases. Federal Reserve monetary policy often has a notable impact on the DJIA. ...
- Dow Jones weighting. ...
- Market moving events.
One way of effectively putting that plan into place is with the Invesco Dow Jones Industrial Average Dividend ETF (DJD). DJD follows the Dow Jones Industrial Average Yield Weighted Index, which is the yield-weighted equivalent of the standard Dow.
How many stocks are in the Dogs of the Dow? ›
The basics of the Dogs of the Dow strategy
All you have to do is look which 10 stocks among the 30 Dow Jones Industrials components have the highest dividend yield on the last day of the year.
How are the Dogs of the Dow chosen? ›
The Dogs of the Dow investment strategy picks the top ten highest dividend-yielding stocks from the Dow Jones Industrial Average (DJIA). The premise behind the Dogs of the Dow investment strategy is to pick companies near the bottom of the business cycle by using dividend yield as a proxy.
How did the Dow Jones do in 2023? ›
U.S. indexes: For 2023, the S&P jumped 24.23%, the Dow gained 13.8% and the Nasdaq rocketed 43.42%.
How has the stock market done in 2023? ›
Let's review the good times of late 2023. The S&P 500, which tracks the most valuable stocks in the U.S. market, rose 11.2 percent in the last quarter — and had a total return of 11.7 percent, including dividends. For the year, it gained 24.2 percent and returned 26.3 percent, including dividends.
What is the Dow performance in 2023? ›
Annual performance of the Dow Jones Composite Index 2000-2023. The Dow Jones Composite Index finished the year 2023 at 12,249.97 points, an increase compared to the previous year.
How many Dogs have been euthanized in 2023? ›
Shelter and rescue populations in the U.S. have surged by 900,000 overall since January 2021, and more than 359,000 dogs were euthanized in 2023, marking a five-year peak, according to animal advocacy group Shelter Animals Count. Meanwhile, 330,000 cats were euthanized last year.
