The Performance of the Dogs of the Dow Investment Strategy for 2024
The Dogs of the Dow strategy, a well-known stock-picking method based on selecting the 10 highest-yielding stocks from the Dow Jones Industrial Average (DJIA), had a somewhat challenging year in 2024. This strategy, which relies on the assumption that high-yield stocks might be undervalued and poised for recovery, includes a diverse mix of companies from various sectors. For 2024, the selected stocks were Walgreens Boots Alliance (WBA), Verizon Communications (VZ), Cisco Systems (CSCO), Dow Inc. (DOW), Coca-Cola (KO), 3M (MMM), Chevron (CVX), Johnson & Johnson (JNJ), IBM, and Amgen (AMGN).
At the beginning of 2024, the portfolio value stood at approximately $148,000. However, despite the promise of attractive dividend yields, the portfolio faced headwinds throughout the year, resulting in a 3.97% decrease in value, closing at $142,000 by year-end. This downturn reflects the broader market dynamics that influenced individual stock performances and highlights the risks inherent in a strategy that relies on high dividend yields as a key selection criterion.
Several factors contributed to the underperformance of the Dogs of the Dow portfolio. Some of the key stocks in the strategy faced challenges due to macroeconomic pressures, including higher interest rates, inflationary concerns, and a general market slowdown. For example, telecommunications giant Verizon (VZ) struggled with increasing competition and a challenging operating environment. Similarly, Dow Inc. (DOW) and 3M (MMM) faced headwinds from supply chain issues, regulatory challenges, and rising input costs. While Chevron (CVX) and Amgen (AMGN) benefited from strong commodity prices and a robust pharmaceutical pipeline, their positive contributions were not enough to offset the losses from other stocks in the portfolio.
Despite these challenges, there were notable performances within the Dogs of the Dow strategy. Cisco Systems (CSCO) showed resilience with strong growth in its networking solutions business, while Johnson & Johnson (JNJ) benefited from its diverse healthcare portfolio, including its pharmaceuticals and medical device segments. These stocks helped mitigate some of the negative impacts from weaker performers, but they were not enough to keep the portfolio in positive territory.
In conclusion, while the Dogs of the Dow strategy typically provides investors with exposure to established, dividend-paying companies, the 2024 performance highlights the importance of considering broader market trends and individual company fundamentals. The portfolio’s decline by 3.97% serves as a reminder that even high-yield stocks can face periods of underperformance, especially in a year marked by economic uncertainty and sector-specific challenges. While the Dogs of the Dow strategy remains a popular and long-term investment approach, it is clear that a diversified investment strategy, alongside careful stock selection, remains crucial for achieving favorable returns.
Looking ahead to 2025, investors will be eager to see how the Dogs of the Dow strategy performs with a new set of high-yield stocks. While the exact list for 2025 will be determined based on the dividend yields at the start of the year, it’s likely to include a mix of familiar, blue-chip companies alongside potential newcomers. The strategy often shifts as dividend yields fluctuate, and some stocks may move in or out of the lineup depending on their financial performance and market conditions. As of early January 2025, the selection will reflect how companies are adjusting to the evolving economic environment, including interest rate changes, inflationary pressures, and global market uncertainties. While the past year was challenging, the 2025 Dogs of the Dow could present new opportunities for income-focused investors, particularly if the economic landscape stabilizes and some of the current underperformers rebound. With a focus on value and dividends, the Dogs of the Dow strategy remains a reliable way for long-term investors to tap into high-quality, income-generating stocks.
With the start of 2025, we have determined the new Dow components for 2025 which are shown below.
To see the current Dogs of the Dow Portfolio, please visit our Dogs of the Dow.