The Dogs of The Dow 2024

The Dogs of the Dow is an investing strategy well-known to retail and institutional investors. The list is published annually by the Dogs of the Dow website. The ten stocks from the Dow 30 that have the highest yield on the last day of the previous year comprise the Dogs of the Dow for the following year. Before diving into the list of the Dogs of the Dow in 2024, let’s first understand the Dow 30.

A Brief History of the Dow 30

The Dow Jones Industrial Average (DJIA) is also called the Dow 30; both names are used synonymously. The Dow Jones 30 is an index of 30 blue-chip stocks created by Wall Street Journal editor Charles Dow in 1896.

The index was created to track the market performance of leading industrial stocks in an era when the availability of information was limited. Initially, there were 12 industrial companies in the index.

In 1916, the number of stocks in the index increased to 20. In 1928, the index was again expanded to 30 stocks, which has been at that number since then. Although the index was initially comprised of industrial stocks, the index later added non-industrial or service stocks. Today, the Technology, Financials, and Healthcare sectors have a significant representation in the Dow 30.

Dow Divisor

The DJIA is price-weighted, unlike most other indices weighted by market capitalization. This fact means equities with higher share prices are given greater weight in the index. It is calculated as the sum of the stock prices of all 30 companies divided by a factor known as the Dow Divisor. 

The Dow Divisor is adjusted for stock splits, dividends, spin-offs, and additions or deletions to the Dow 30. The Wall Street Journal calculates the Dow Divisor. The Dow Divisor formula attempts to maintain continuity, and it has been as high as 16.67 in 1928 and as low as 0.147 in 2019. The value of the Dow Divisor is 0.15172752595384, as Barron’s Market Lab reported.

How Are the Dow 30 Selected?

Today, the Dow Jones Industrial Average companies are chosen by a committee. The S&P Dow Jones Indices maintains the index, which is majority-owned by S&P Global (SPGI). The index does not include Transportations and Utilities, which have their own indices. The stock selection criteria are only partially transparent. Reportedly, to be considered for the Dow 30, a company must meet the following requirements:

• Must be incorporated and headquartered in the United States
• Generate the majority of its revenue from the United States
• Help make the Dow representative of the overall U.S. economy
• Attract a large number of investors
• Demonstrate sustained growth
• Have an excellent reputation

The last time the Dow Jones Industrial Average was changed was in 2020 when ExxonMobil (XOM), Raytheon (RTX), and Pfizer (PFE) were removed, and Salesforce (CRM), Honeywell (HON), and Amgen (AMGN) were added.

Stocks in the Dow 30

The current stocks in the Dow 30 are listed in the table below. The 2024 Dogs of the Dow are picked from this list at the end of each calendar year.

At the start of 2024, two stocks do not pay dividends and thus cannot be included in the Dogs of the Dow. Salesforce (CRM) has never paid a dividend. In addition, Boeing (BA) suspended its dividends because of challenges during the COVID-19 pandemic and the Boeing 737-900 Max. Disney restarted its dividend in 2023 after suspending it in 2020.

The Dow 30

The 30 stocks in the Dow Jones Industrial Averages (DJIA)

Ticker	Company	Dividend Yield	Dividend 10-Year Avg (%)	Payout Ratio	Price / Earnings	Cap ($M USD)
AAPL	Apple	0.50%	8.20%	15.30%	30.3	$2,885,813
AMGN	Amgen	2.90%	16.30%	58.90%	22.1	$166,365
AXP	American Express	1.30%	10.10%	26.60%	17.7	$138,331
BA	Boeing	-	-	-	-	$138,539
CAT	Caterpillar	1.80%	8.00%	27.60%	16.6	$148,780
CRM	Salesforce	-	-	-	99	$252,522
CSCO	Cisco Systems	3.10%	8.70%	46.60%	15.2	$206,638
CVX	Chevron	4.00%	4.20%	44.00%	11.1	$282,218
DIS	Walt Disney	0.70%	-10.00%	0.00%	70.9	$167,565
DOW	Dow	5.10%	-	152.20%	29.9	$38,632
GS	Goldman Sachs Gr	2.80%	17.50%	49.00%	18.8	$126,812
HD	Home Depot	2.40%	18.30%	52.20%	22.3	$346,281
HON	Honeywell Intl	2.10%	9.10%	50.70%	25.1	$133,583
IBM	IBM	4.10%	5.70%	86.70%	20.8	$147,139
INTC	Intel	1.00%	-5.70%	-	-	$204,265
JNJ	Johnson & Johnson	3.00%	6.10%	34.60%	30.3	$388,847
JPM	JPMorgan Chase	2.40%	10.70%	24.20%	10.3	$500,377
KO	Coca-Cola	3.10%	5.10%	73.40%	24.3	$259,880
MCD	McDonald's	2.30%	7.50%	53.20%	25.8	$211,727
MMM	3M	5.50%	9.00%	-	-	$60,125
MRK	Merck & Co	2.60%	5.80%	161.30%	65.4	$297,443
MSFT	Microsoft	0.80%	10.40%	26.20%	36.4	$2,784,794
NKE	Nike	1.40%	11.90%	40.10%	30.2	$156,996
PG	Procter & Gamble	2.50%	4.60%	58.50%	24.2	$350,445
TRV	Travelers Companies	2.10%	7.20%	41.20%	20.8	$43,923
UNH	UnitedHealth Group	1.40%	21.00%	30.30%	23.3	$496,240
V	Visa	0.80%	17.90%	21.70%	31.8	$539,569
VZ	Verizon Communications	6.80%	2.30%	52.80%	8.1	$168,584
WBA	Walgreens Boots Alliance	3.90%	4.30%	290.90%	38.8	$22,102
WMT	Walmart	1.40%	1.90%	37.70%	26.3	$426,045

History of the Dogs of the Dow

The concept of investing in the highest-yielding Dow 30 or Dow Jones Industrial Average stocks was reportedly popularized by Michael B. O’Higgins in his book “Beating the Dow,” published in 1991. These stocks are considered “dogs” or not desirable for investors. However, the investing strategy argues that these stocks can have significant gains in price plus relatively high dividend yields. This occurs because the stocks are thought to be temporarily oversold.

The Dogs of the Dow website is primarily dedicated to the investing strategy. The website initially published the Dogs of the Dow list in 1996 and included Philip Morris (MO), Texaco (TX), JP Morgan (JPM), Chevron (CVX), Exxon (XON), Dupont (DD), 3M (MMM), International Paper (IP), General Electric (GE), and Eastman Kodak (EK).

The Dogs of the Dow 2024

The list of the Dogs of the Dow 2024 is given in the table below. The list is based on data from December 31, 2023, when the Dogs of the Dow for 2024 were identified. The average yield at the start of 2024 was 4.1%, more than twice the average of the S&P 500 Index.

One interesting point is that by following this strategy, 30% of a portfolio would be in the Healthcare sector, while 20% would be in the Technology sector. So, this portfolio is a concentrated one. 

Note the Dogs of the Dow 2024 list is static for the year, meaning it does not change until 2025.

Ticker	Company	Dividend Yield	Dividend 10-Year Avg (%)	Payout Ratio	Price / Earnings	Cap ($M USD)
AMGN	Amgen	2.90%	16.30%	58.90%	22.1	$166,365
CSCO	Cisco Systems	3.10%	8.70%	46.60%	15.2	$206,638
CVX	Chevron	4.00%	4.20%	44.00%	11.1	$282,218
DOW	Dow	5.10%	-	152.20%	29.9	$38,632
IBM	IBM	4.10%	5.70%	86.70%	20.8	$147,139
JNJ	Johnson & Johnson	3.00%	6.10%	34.60%	30.3	$388,847
KO	Coca-Cola	3.10%	5.10%	73.40%	24.3	$259,880
MMM	3M	5.50%	9.00%	-	-	$60,125
VZ	Verizon Communications	6.80%	2.30%	52.80%	8.1	$168,584
WBA	Walgreens Boots Alliance	3.90%	4.30%	290.90%	38.8	$22,102

Eight of the ten stocks on this list were on the Dogs of the Dow 2023. The two changes were Intel Corporation (INTC) and JPMorgan Chase (JPM) dropped off the list, and Coca-Cola (KO) and Johnson & Johnson (JNJ) were added to it.

Intel cut its dividend by almost two-thirds, reducing the yield. On the other hand, JPMorgan performed well, lowering the yield. Coca-Cola and Johnson & Johnson increased their dividend but had relatively poor price appreciation.

How Does the Dogs of the Dow Investing Strategy Work?

According to the Dogs of the Dow website,

“Dogs of the Dow is a stock picking strategy devoted to selecting the highest dividend paying Dow stocks.”

The general idea for the Dogs of the Dow strategy is to make stock picking simple and relatively safe. The Dogs of the Dow focuses on blue-chip stocks paying a dividend. The strategy is also meant to be a long-term strategy requiring less effort than constant trading. The Dogs of the Dow pay dividends, and a few are dividend growth stocks, but it is not strictly a dividend growth investing strategy.

The investing strategy requires a person to have equally weighted positions in the ten Dogs of the Dow. For example, at the end of the calendar year, an investor should select the ten highest-yielding Dow 30 stocks. Then, they rebalance their portfolio at the beginning of the new year to return to a 10% allocation for each stock. 

A person may also need to sell stocks no longer in the Dogs of the Dow due to changes in the Dow 30 or price appreciation and corresponding declines in dividend yield. Note that equal weighting means that the strategy does not follow the same principle of price weighting as the underlying index.

The Dogs of the Dow strategy assumes blue-chip companies do not change their dividend to reflect the normal business cycle. On the other hand, stock prices reflect the business cycle. Hence, high yields and low stock prices should mean that a company is at the bottom of the business cycle, while low yields and high stock prices should mean a company is near the top of the business cycle.

Limitations of Dogs of the Dow

The Dogs of the Dow strategy sounds simple, but it takes some effort, like most things related to portfolio management. Also, it is not an indexing strategy. Similar to most do-it-yourself (DIY) strategies, there is an active element. That said, the actual trading and rebalancing are limited to a small part of the calendar year. 

The method maximizes yield in a relatively small universe of 30 blue-chip stocks. Hence, your portfolio may not be diversified across sectors. Furthermore, the strategy can lead to a concentrated portfolio in a limited number of sectors, especially if one is out of favor, e.g., oil majors during the COVID-19 pandemic.

Does the Dogs of the Dow Strategy Work?

Investors want to know the answer to the question, Does the Dogs of the Dow strategy work? The answer seemingly is yes despite the limitations and general criticism of the Dow 30 and Dogs of the Dow.

O’Higgins back-tested the strategy to the 1920s and found that the Dogs of the Dow outperformed the broader market. For instance, between 1992 and 2001, the Dogs of the Dow returned 10.8% average annual total returns, matching the Dow 30 and beating the S&P 500 Index, which returned 9.6%.

The Dogs of the Dow website states since 2000, the strategy has had an average total return of ~9.3% when dividends are reinvested. This return is better than the average annual returns of ~8.7% for the Dow 30 during the same period. In addition, the S&P 500 Index has returned ~7.1% in the same stretch. Notably, this period includes the dot-com bust, the Great Recession caused by the sub-prime mortgage crisis, the bear market during the early stages of the COVID-19 pandemic, and the 2022 bear market.

Another analysis of returns from 2008 to 2018 indicates the strategy generally works. For example, in 2008, the Dogs of the Dow would have underperformed the DJIA. However, it would have outperformed the DJIA in eight out of ten years.

Another article indicates the Dogs of the Dow beat the DJIA by more than 1% annually on average in the decade through 2019. The Dogs of the Dow only trailed the broader index in three out of 10 years.

However, the Dogs of the Dow strategy underperforms for some periods. For example, the annualized return was about 9.2% compared to approximately 16.0% for the S&P 500 Index in the decade through 2021.

The Bottom Line About the Dogs of the Dow 2024

Why does the Dogs of the Dow strategy seemingly work? First, the dividend yields are relatively high, leading to an initial advantage compared to stocks with lower dividend yields. Second, a stock often has a high dividend yield because the share price has fallen. This occurs either due to sector or company-specific difficulties. Usually, a stock on the Dogs of the Dow list is undervalued compared to the broader market. It follows a strategy of investing in temporarily undervalued stocks. Ultimately, the Dogs of the Dow is a contrarian strategy.

Prior Year Dogs of the Dow

• Dogs of the Dow 2023
• Dogs of the Dow 2022
• Dogs of the Dow 2021
• Dogs of the Dow 2020
• 3 Worst Performing Dow Jones Stocks in 2023
• 3 Worst Performing Dow Jones Stocks in 2022
• 3 Worst Performing Dow Jones Stocks in 2021
• 3 Worst Performing Dow Jones Stocks in 2020
• 3 Worst Performing Dow Jones Stocks in 2019

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For Canadian stocks:

• List of Canadian Dividend Aristocrats in 2023

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