The "Dogs of the Dow" strategy is an investment methodology that involves purchasing the highest dividend-yield stocks from the 30 stocks, mostly blue-chip companies, listed under the Dow Jones Industrial Average ("DJIA").
This strategy is powered by a simple concept. The high-yielding stocks that make up the portfolio are the ones with prices that are lower relative to the dividend paid. This implies that these stocks have underperformed recently. These companies do not stay undervalued for too long as share prices of companies at the bottom of their business cycle appreciate relatively faster than companies at other stages of their business cycles.
This particular stock-picking strategy can be considered a dividend-based strategy. Generally, stocks with stable dividend policy are regarded as sound additions to one's investment portfolio. Dividend-paying stocks carry low risk and are favored as these reduce the overall portfolio risk.
The Dogs of the Dow strategy is easy to implement and does not necessitate continuous monitoring or sound technical analysis. This makes it attractive to passive investors.
However, this strategy completely ignores stocks with high growth potential, which may or may not be dividend-paying.
We bring four stocks from the 'Dogs of the Dow' list that have a dividend yield of more than 2%. These blue-chip stocks have a market capital in excess of $50 billion, have a solid Zacks Industry Rank, and are placed within the top half of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Added to the intrinsic value proposition of these stocks, a healthy dividend yield satisfies the appetite of risk-averse investors. The fact that these stocks have the potential to outperform the market while also historically providing a decent dividend yield has made them prized assets.
The Goldman Sachs Group, Inc. GS is a prominent global financial holding company that provides investment banking (IB), securities, investment management and consumer banking services to a diversified customer base.
Goldman Sachs' focus on the core strengths of IB and trading businesses through restructuring initiatives and opportunistic buyouts will boost its presence in overseas markets. Improvement in global deal-making and underwriting activities and its leading position will likely aid IB's revenue growth. A decent liquidity position will aid capital distribution moves. Its strategic acquisitions continue to help diversify the fee-revenue base, aiding top-line growth.