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'Dogs of the Dow' refers to a disciplined investment strategy that takes guesswork out of the stock selection process. To invest in the Dogs of the Dow you simply have to take the following steps:
The Dow Jones Industrial Average is a listing of 30 stocks selected by Dow Jones & Company (owned by the Wall Street Journal). These 30 stocks are selected to serve as a benchmark of the economy as a whole and the average has proven to be very popular. The Dogs of the Dow strategy is based on a simple assumption: the ten companies who have the highest dividend yield are the ones who are not performing well, but since they are in the mighty DJIA, their poor performance should only be temporary. According to the assumption, these temporarily out of favor, yet solid stocks have the highest chance of rebounding.
There is plenty of analysis to support the underlying principle of the Dogs of the Dow investment strategy. According to DogsoftheDow.com, this strategy has outperformed the full DJIA over several time frames. Of course, no financial investment strategy is guaranteed, but this one definitely deserves a closer look.