Last December, I made a post about THE GREAT 2017 DOGS OF THE DOW EXPERIMENT. The purpose of the experiment was to test one of the most popular investment strategies that’s been floating around since it’s creation in 1991 by Michael B. O’Higgins, a money manager based out of Miami, FL.
The basic idea is to take the list of stocks in the Dow 500, sort them by highest dividend yield and the top 10 stocks will be the Dogs of the Dow. In this investment model, it means those 10 stocks are undervalued because their dividend yields are among the highest in the Dow. Does it work? Not Always, but it’s fun to see if it does this year.
During the week that I was working on the post, I purchased $500 in each of the 2017 Dogs.
|3 shares of IBM @ 165.90||5 shares of CAT @ 92.80|
|9 shares of MRK @ 58.80||15 shares of PFE @ 32.50|
|6 shares of PG @ 84.05||3 shares of BA @ 155.78|
|17 shares of CSCO @ 30.20||10 shares of VZ @ 53.40|
|5 shares of XOM @ 90.40||4 shares of CVX @ 117.65|
Let’s take a look and see how they have been doing for the last 3 months or so.
IBM has fared well in the last 3 months since I’ve purchased them. I’m currently up 5.75% and have received a $4.20 dividend payment already.
The first round of news came from their reported earnings beat on January 19th that started them on an uptrend to where they currently are located. They have since been upgraded by various stock firms.
CAT benefited from the initial surge when Donald Trump took office. It shot up towards $99 a share but has since dropped below my initial cost. It’s currently down -1.5% overall. I have received a single dividend of $3.85 and also made the mistake of DRIPing another share at it’s all time high price of 98.80.
CAT posted earnings towards the end of January where they beat EPS but missed on revenue (Source). Coupled with the weaker guidance from their conference call, CAT dipped hard. Pile on top of that allegations of tax fraud, we can see why they’ve been having a hard time lately.
MRK has been doing well for itself with shares up over 7.9% since I purchased them. I have also received a single dividend in the amount of $4.23.
They posted mostly middle of the road earnings where their EPS was inline but they missed revenue for the quarter. (Source)
Pfizer has been another positive return so far for the Dogs of the Dow. It’s currently up 5.48% since they were purchased and add on top of that the $4.80 dividend that they paid in March, it’s looking pretty healthy return-wise.
They reported some not-so-great earnings that saw them missing both EPS and revenue. (Source) In the beginning of February, they announced a $5B accelerated share buyback program. (Source) It seems like the market doesn’t care much as they have been on a tear since February.
With a total return of 7.4% and a single dividend payment of $4.02, Proctor and Gamble is setting itself up to be the love of my life. I’ve always heard great things about PG and knew that they would always be part of my portfolio. With the Dogs of the Dow Experiment I was able to make that a reality. I’ve already DRIP’d one share and would love to add even more if it happens to ever dip again this year.
On the news side of things, PG released positive earnings in January. (Source) There was also news of Nelson Peltz’s Trian Fund taking a 3.5 billion stake in P&G which sent shares soaring. (Source)
BA has been on fire ever since Donald Trump took office and are currently up 14% in total return plus the $4.26 dividend payment in March.
They posted positive earnings (Source) Even though they posted tepid guidance for the next year, the market has been full on bullish with the stock.
This tech stock has so far given me a total return of 12.7%, plus a dividend payment of $4.42.
Cisco beat EPS and revenue but still found the stock sliding downward. (Source) It has crawled back up in share price and has been looking pretty healthy overall.
Verizon is one of the laggards of this experiment with a total return of -6%.
If we look through their newsfeed, it looks like the decline started with missing EPS on earnings. (Source) There was also talks of a Verizon/Charter collaboration and in a more somewhat controversial subject, Verizon has decided to bring back unlimited data. Analysts are saying it will be bad for the entire sector as a whole. Of course, it will be great for consumers. Only time will tell what happens. I wouldn’t count VZ out quite yet. I don’t think they’re going anywhere.
Another disappointment in the Dogs has been XOM which is currently sitting at a total return of -8% since it was purchased.
A lot of it has to do with the turbulent nature of oil right now as it dipped below $50 and continues to go down. I’m not too familiar with the intricacies of oil but our reliance on fossil fuels isn’t going anywhere anytime soon. In other news, they also missed earnings. (Source)
The last one on the list is another underperformer. So far this year, CVX has a total return of -7.8%
The analyst is mostly the same as XOM above since they’re both oil energy stocks. They too missed earnings (Source) On the plus side, revenue is up 7.7% Y/Y so its not all doom and gloom.
Of course, we should go ahead and show the Dow Jones Year-To-Date returns for a fair comparison
Looks like 6 of the 10 stocks from the experiment are beating the YTD for the Dow. Not terrible but not great. I’ll update everybody once again halfway through the year and see if our laggards can get their butt in gear and start making me some money!
4 thoughts on “2017 Dogs of the Dow Quarterly Update”
The Dog theory works form many years but not all. I did a similar experiment years ago when I did the Foolish Four. It was created by the Motley Fool founders David/Tom Gardner. Same idea except you focus on only four instead of ten low priced high yielding stocks from the DOW. Here are my results: http://divhut.com/foolish-dividend-investing/
That’s super interesting to me DivHut.I’ll see where this experiment takes me but I’m cautiously optimistic!
Interestingly, neither of the two consumer giants had particularly good years, with both stocks underperforming the broader Dow in 2016.
You’re right afoffe. I wonder if its more of a short term thing vs long term.