Dogs of The Dow
The original dogs of the dow theory is appealing for various reasons:
Simplicity. The Dogs of the Dow theory is very simple to follow as you buy the 10 highest dividend yielding stocks from the Dow Jones Industrial Average [DJIA] and hold them for a year. The built-in tax advantage. Since you hold these stocks for a year, it translates into lower capital gains tax (currently no more than 15%). High dividend yields. By the very definition of the theory you are picking stocks that pay nice dividends and hence continue to reward you through the year even if the price of the stock does not appreciate much.
So how have the Dogs of the Dow held up in 2006? While the "Bulls" and the "Bears" are trying to find their footing on Wall Street this year, the "Dogs" have been barking up the right tree as the following tables illustrate,
2006 Dogs of the Dow**
|Dog||Symbol||Price Then |
|Price Mid-Year |
|Price Now |
|JP Morgan Chase||JPM||$39.69||$41.66||$44.35||11.74%|
|Total Returns Excluding Dividends||13.74%|
** Ordered by dividend yield on December 30, 2005
* Does not include dividends
These returns are very impressive and represent an annualized return of 23.65%. How does this compared with the returns from the major indices this year?
|2006 Dogs of the Dow||13.74%|
|Dow Jones Industrial Average||3.35%|