Given that 2011 has been defined by an uncertain economic outlook and promises by central banks in Canada and the United States to keep interest rates low, it is hardly surprising that dividend-payers have been among the best-performing stocks. The Dogs of the Dow is a good way to illustrate this outperformance.
This is actually an investing strategy that entails buying the 10 highest-yielding stocks within the Dow Jones industrial average at the start of the year, in equal weights, and holding them for the next 12 months. It has had a rough few years, partly because the financial crisis took a heavy toll on dividend stocks. This year, though, is about to deliver some very good news for the Dogs.
Bespoke Investment Group reports that the 2011 Dogs have delivered gains of 12.8 per cent, as of Tuesday. That doesn't include dividends – and more importantly, it wallops the 3.8 per cent decline for the 20 other stocks in the Dow. McDonald's Corp. was the top Dog, rising 31 per cent. The strategy had just one stock in the red: DuPont , which fell 7.3 per cent.
For the 2012 list of Dogs, there are likely to be few changes. AT&T Inc. , Verizon Communications Ltd. , Pfizer Inc. , Merck & Co. Inc. , Kraft Foods Inc. , Johnson & Johnson , Intel Corp. and DuPont are back. But the big gains from McDonald's in 2011, means that it gets turfed out. Chevron is gone too. In their place, say hello to Procter & Gamble and General Electric Co.