The 10 New Dogs of the Dow
- The highest-yielding stocks in the Dow Jones Industrial Average are known as the Dogs of the Dow.
- I’ve isolated 10 bullish stocks from this group set to bring market-beating returns in 2020.
- I use one seasonal approach to stock trading that delivered a 40% overall gain last year. Learn more about it here.
Every year, I like to share one simple investment strategy that helps you outperform the stock market — and it’s true in any trading environment!
I focus on one group of stocks that produce the highest yields in the Dow Jones Industrial Average — the Dogs of the Dow.
These stocks make up one system with a great track record of outperforming the broader markets. And it can bring traders even bigger gains after years when it fails to deliver.
2020 is a phenomenal year to implement this simple approach to investing.
The basic strategy is simple enough for any trader to understand. Each year, you buy the 10 highest yields of the 30 Dow stocks and hold them for the next 12 months.
Just by following this approach, you’ll likely outperform the Dow month over month … and year over year!
It’s a simple, yet very effective, way to beat the index’s underlying benchmark.
Now, I want to explain why beating this benchmark should be your No. 1 goal — and how the Dogs of the Dow can help you achieve it.
Beat the Dow’s Benchmark in 2020
Each investor’s minimum goal is to outperform the underlying benchmark.
Now, some investors create alternative benchmarks that closely relate to their own investment strategies.
But if your strategy isn’t beating a broad market index like the Dow Jones or the S&P 500 Index, then what’s the point? You’re simply leaving money on the table.
All traders have other goals they focus on, such as limiting risk, finding value stocks or looking for growth opportunities. Still, at a minimum, you should make it your goal to outperform the broad market.
I sent a tweet out last week highlighting the significance of beating the benchmark:
The S&P 500 $SPX was up 28.71% in 2019, best since 2013. If you didn't beat it, you need to reevaluate your portfolio. Whatever your objective is, the basic benchmark for #investing is the S&P 500 – 500 of the largest U.S. listed stocks. Beat that, then focus on your objective.
— Chad Shoop, CMT (@ChadShoopGuru) January 2, 2020
As you can see, the S&P 500 is my go-to benchmark. It’s an index that anyone can invest in.
Any investing strategy you use should be set to outperform it — including your total portfolio performance.
Don’t count just your winners. Look at overall performance.
Even though the Dogs of the Dow had an impressive 19% return in 2019, they failed to outperform both the Dow and the S&P 500. They posted gains of 25% and 30%.
It wasn’t a successful year for the strategy, but it has a history of rebounding a year after it underperforms.
It happened in 2009 and 2017. The Dogs of the Dow unperformed both of those years with a double-digit gain, only to bounce back and outperform the following year — and this happened each time!
In 2010, DowDuPont produced the second-highest performance in the Dow with a 48% return. In 2018, it was Dogs of the Dow stock Merck & Co. (NYSE: MRK) with the top gain of the index at 35%.
Below, I’ll share with you a top stock I see leading the Dow higher in 2020.
But the key takeaway is that, after a year of underperformance, these stocks bounce back.
They underperformed in 2019 even with a double-digit return. But this powerful pattern tells me that these stocks will easily outperform the Dow once again in 2020.
The 10 New Dogs of the Dow
This year, the 10 highest-yielding stocks in the Dow are …
|Stock||Ticker||Yield on 12/31/2019|
|Dow Inc.||NYSE: DOW||5.1%|
|Exxon Mobil Corporation||NYSE: XOM||4.9%|
|IBM Common Stock||NYSE: IBM||4.8%|
|Verizon Communications Inc.||NYSE: VZ||4.0%|
|Chevron Corporation||NYSE: CVX||3.9%|
|Pfizer Inc.||NYSE: PFE||3.8%|
|3M Company||NYSE: MMM||3.2%|
|Cisco Systems Inc.||Nasdaq: CSCO||2.9%|
These 10 stocks, with their price returns and dividend yields, will have you on the fast track to a double-digit gain in 2020 — and they’re all set to outperform the Dow!
Simply buy and hold these 10 stocks.
As investors continue to seek a haven in high-yield and blue-chip stocks, these 10 companies will be in high demand to start the year.
The new stocks added to the list this year are Dow Inc. (NYSE: DOW), Walgreens Boots Alliance Inc. (Nasdaq: WBA) and 3M Co. (NYSE: MMM). I replaced a bank stock and two health care-related companies. The other seven remained on the list thanks to their elevated dividend yields.
Now, each of these stocks presents a solid income opportunity in 2020. And there’s one stock on my list that is set to lead a rally in oil this year.
In my latest episode of Bank It or Tank It, I break down Chevron (NYSE: CVX), one of the Dogs of the Dow for 2020.
I look at how the current situation with Iran will impact the oil and gas giant. I let you know what its price chart is telling us, and the price target I’m looking for the stock to hit in the coming months.
Check out the video below.
The Dogs of the Dow present unique opportunities to collect a steady stream of profits in 2020.
It’s a strategy that you’ll hear more about as the year marches on. Just know that with these 10 stocks in your portfolio, you can stay invested through the stock market’s volatile currents.
And that’s the foundation of any successful stock trading strategy — an approach that brings returns whether the bulls or bears dominate the market.
Chad Shoop, CMT
Editor, Automatic Profits Alert
P.S. If you like trends such as the Dogs of the Dow, then you’ll want to check out my seasonal stock research service, Automatic Profits Alert. It’s a unique approach to investing where we let the seasonal patterns in the stock market guide our recommendations. In doing so, I’ve developed a strategy that delivered more than a 40% overall gain in 2019! You can learn all about it here.