Dogs of the Dow = Almost Every Dow Stock
- March 4, 2009
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Those investors trying to follow a ‘Dogs of the Dow’ strategy are probably asking “who let the dogs out”?
While there are several variations of the Dogs of the Dow strategy, one popular strategy refers to investing in Dow stocks with dividend yields of over 3%. Usually that will include only a small handful of stocks. However in this market environment it seems that almost every Dow stock yields over 3%. In fact, 22 out of the 30 Dow stocks now pay a dividend in excess of 3%.
Some key Dow dividend stock statistics:
Average Yield: 4.4%
Companies paying dividends: 29 (out of 30)
Smallest Dividend Yield: 1.0% (JP Morgan Chase)
Highest Dividend Yield: 11.0% (Alcoa)
Companies Paying Dividends of 3% or More: 22
Companies Paying Dividends of 5% or More: 11
The falling stock prices of the Dow component stocks have been the primary driver of the rising dividend yields. Despite the fact that many companies have announced dividend cuts, the dividend yields seems to keep climbing higher. In 2000, the average dividend yield for the Dow index fell to an all-time low of 1.4%. So the dividend yield has more than tripled since the beginning of the decade.
The real question of course is how much higher will the dividend yields go if stock prices keep falling?
During the Great Depression, the average yield for the Dow Jones index reached an all-time high of over 15%. While it’s highly unlikely that we will see valuations fall enough to reach that level again, there has been little evidence to indicate that the market has bottomed yet either.
