What is The Dogs of The Dow and How Can You Use It?

Are you trying to find an investing strategy that fits your style?

The Dogs of The Dow might be right for you.

Yesterday I wrote about Dividend Yield.

Today we will use dividend yield with The Dogs of The Dow strategy.

Before we can get into how to use The Dogs of The Dow, you need to know what it is.

So let’s dive in.

What is The Dogs of the Dow

There’s actually an entire website devoted to this strategy. It’s dogsofthedow.com.

Here’s the website’s definition:

Dogs of the Dow is a stock picking strategy devoted to selecting the highest dividend paying Dow stocks.

To elaborate on that, it’s a strategy where you purchase the 10 stocks in the Dow Jones Industrial Average that have the highest dividend yield.

You have to rebalance your Dogs every year.

You sell the stocks that fall off out of the top 10 and buy the stocks that enter the top 10.

There’s also a strategy called The Small Dogs of The Dow.

It’s just the 5 stocks with the highest dividend yield instead of 10.

This strategy is built on the assumption that stocks on the Dow Jones Industrial Average with high dividend yields are cheap.

It also assumes these stocks won’t reduce their dividend.

How Has The Dogs of the Dow Performed

Dogsofthedow.com did the hard work for us.

Just click on that link and look at the performance.

I’ll also summarize it here.

Since 2000, The Dogs of The Dow provided an average annual return of 8.6%. The Small Dogs of The Dow provided 10.4%.

Meanwhile, the Vanguard Index 500 returned a lowly 6.0%.

So The Dogs of The Dow have crushed the market right?

Hold on there, the devil’s in the details.

Note 2 provides us with a key piece of information. Trade commissions were not included in this calculation.

You might just gloss over this fact but that would be a huge mistake.

Trade commissions will kill your returns.

Let me give you an example.

As of 3/23/17, Verizon Wireless is $49.64 to buy 1 share of their stock.

eTrade charges $6.95 per trade on stock trades.

If you buy one share of Verizon Wireless, you just paid 14% commissions.

You know what the Vanguard Index 500 charges in commissions? $0 but they do have an expense ratio of 0.16%.

That’s a huge difference and it’s just listed in a footnote.

This doesn’t mean you shouldn’t ever look at using The Dogs of The Dow but it does mean you better have a bunch of money to invest.

You need to trade at least $4,344 per trade to make $6.95 lower than 0.16%.

Good luck coming up with that every month.


The Dogs of The Dow and the Small Dogs of The Dow are interesting investing strategies.

And definitely worth having in your investor toolbox.

But they are definitely a more advanced investing technique.

So proceed with caution.

Do you like The Dogs of The Dow as a trading strategy and would you use it?

Let me know in the comments below.

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