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Yield can go down even while a dividend increases, in situations where the shares (equity) appreciate at a rate faster than the dividend’s growth. Yield can also go up in situations where the dividend is slashed, if the share-price goes down to a greater extent. Dividend growth is a function of a company and its management’s decisions, while the yield per share is more a function of the market pricing of the company, its assets, and its dividend payout rate/growth.
Many investors have been craving higher yielding investments. The interest rate most banks now offer for cash and CDs is nearly nothing, and short and intermediate term U.S. Treasuries are not much better. Worse yet, U.S. debt is facing downgrade fears. As a result, many investors are avoiding the bond markets and the potential depreciation there, and instead looking for stable large-cap equities that can fill the fixed income portion of their portfolio.
The "Dogs of the Dow" theory presumes that investing in the 10 Dow Industrial components that enter a calendar year with the highest yields is a prudent investing strategy. The theorists note that these components should all be relatively strong companies, and that their high yields indicate that they could possibly appreciate to a higher price and also pay out the above-average dividend.
Below are the historic year-end yields for the current dogs of the Dow over the last five years:
[Click all to enlarge]

1. AT&T (T)



2. Verizon (VZ)

3. Pfizer (PFE)



4. Merck (MRK)



5. Kraft (KFT)

6. Johnson & Johnson (JNJ)



7. Intel (INTC)



8. Dupont (DD)



9. McDonald's (MCD)



10. Chevron (CVX)

As substitute for or compliment to the fixed income portion of a portfolio, allocating into these 10 stocks would provide a yield near the 30-year U.S. Treasury rate, with a strong history of dividend growth and price appreciation. Within 2011, this group has appreciated approximately 9%, not counting dividends.
Another great thing about the Dogs of the Dow theory is that the companies are usually familiar to American consumers, and they will find it easy to obtain news and information on them. Further, the companies are highly liquid, and investors probably do not have to fear being unable to sell their shares at a fair market price.
Disclosure: I am long KFT.
Source: Historic Year-End Yield Analysis of the 2011 Dow Dogs