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2022 Dow Dogs and SDOG: Annual dividend based stock strategies

Written By | Jan 2, 2022
SDOG, Dow Dogs, dividend based stock strategiesAugust Dog Days of Summer

Image of Jackson Bark, Chicago. By “Jackson Bark,” via Wikipedia entry of the same name, CC 4.0 license.

WASHINGTON – Thank heaven. As an essentially miserable 2021 slips into history behind us, we can now take a reasonable look at 2022. For starters, let’s take a look at our more or less final 2022 Dow Dogs listing of stocks. And while we’re at it, we should also give a brief nod to it broader-based ETF cousin, SDOG. (More on this one a bit later.) Both are largely dividend based stock strategies. The kind of conservative stock strategies often worth holding in an uncertain year, like 2022.

But before our 2022 Dow Dogs, a brief look back on 2021.

Despite its health and governmental travails, 2021 generally proved a decent investment year for investors. Or at least for those investors who didn’t panic out of their holdings during a couple of massive selling tsunamis that at least served to drive likely record sales of Maalox.

Mr Market actually did quite well last year. Evidence? Despite a fairly relentless Q4 selloff in the previously hot tech sector, the S&P 500, at least gained upwards of 27% YoY. At least according to most analysts.

But what proved puzzling to some extent was why this bizarre 2021 rally even took place. The investment climate last year couldn’t have been worse. 2021 started out with what history will judge as the worst excuse for a national revolution in recorded history. (Read more about this here.)

Can 2022 continue 2021’s surprising rally? Can the 2022 Dow Dogs help?

Short answer to Question #1: No. Or, well, probably not. The reason why is simple. 2021’s continuation of Mr Market’s pre-Covid rally mode was simply a final extension to the rational exuberance that President Trump’s economic policies launched.

And that’s the peg we need to get back to the main topics of this column: the Dow Dogs and, better yet, All Dogs, the 2022 Edition. Both are dividend based stock strategies.

Short Answer to Question #2: Maybe. The Dow Dogs – or more correctly, the “Dogs of the Dow Strategy” – likely existed before you and I were born. The theory here is quite simple. Just buy up the top 10 highest dividend-paying stocks in the Dow Jones Industrial Average of America’s 30 highest dividend-paying stocks. Hold them for a year. And sell them for fun and profit. While spending an entire year collecting those abnormally-high dividend paying stocks.

Well, that’s the theory, anyway. Problem is, as I learned while studying to pass my NYSE and NASDAQ exams years ago to qualify as an actual stock broker, nothing in the stock market is guaranteed. (In fact, I was ordered to never use the word “guaranteed” EVER when discussing investments with a current or prospective client.)

Does this Dow Dogs dividend based stock strategy always work? (Hint: No strategy ever does.)

The Dow Dogs strategy often (not always) works for investors, at least to some extent. But no one can absolutely guarantee this outcome. On the other hand, Dow companies are highly unlikely to file for bankruptcy even in a big market downturn. So at least Dow Dogs investors have that.

Which is why many investors still like to play this strategy at or near the beginning of each new year. (Which is when you’re supposed to put it into action.) At the very least, investors are fairly unlikely to get badly hurt in these investments. (But again, that relatively benign outcome isn’t “guaranteed” either.) But when the Dow Dogs work, they can actually be a lot of fun. Aided and abetted by a bit of luck. (Like the famous, though erratic, “Super Bowl Indicator.”)

There are many ways to practice the Dow Dogs strategy. For investors with a fair amount of loose coin, they might buy equal amounts of all 10 of this year’s Dow Dogs. But given the recent fashion that seems to prevent companies from doing stock splits, the per-share prices of a great many securities, including those mega-sized Dow 30 Industrials, have soared to the point where buying the traditional “round lot” of shares (100 shares) of each company would likely require the average investor to have a bank account that rivaled Warren Buffett’s.

So most small investors today do a bit of slicing and dicing when choosing which Dow Dogs to put in their portfolios. The one I used for years (assuming I had enough cash to do so) is to choose the most promising stocks from the top 5 in the current year’s list and invest in them.

Which, helpfully, bring us to our 2022 Dogs of the Dow list

We’re listing 2022’s Dow Dogs in descending dividend-yield order, based on a screen run after markets closed on December 31. I.e., the top-yielder is #1, next in line is #2, etc. This list was calculated and generously made public via longtime investment site 24/7 Wall Street. It was compiled and made available on January 1, after the site finalized 2021’s closing numbers.

Here we go, with the highest yielder leading off the list. Company name comes first, then the exchange and trading symbol. And finally, the current dividend yield calculated from each stock’s closing price on December 31, 2021. BTW, you’ll see some repeat appearances by the stars of last year’s list.

1. Dow Inc. (NYSE: DOW): 4.94%
2. International Business Machines Corp. (NYSE: IBM): 4.91%
3. Verizon Communications Inc. (NYSE: VZ): 4.83%
4. Chevron Corp. (NYSE: CVX): 4.57%
5. Merck & Co. Inc. (NYSE: MRK): 3.60%
6. Walgreens Boots Alliance Inc. (NASDAQ: WBA): 3.59%
7. Amgen Inc. (NASDAQ: AMGN): 3.45%
8. 3M Company (NYSE: MMM): 3.33%
9. Coca-Cola Co. Inc. (NYSE: KO): 2.84%
10. Intel Corp. (NASDAQ: INTC): 2.70%

Full disclosure:

I’d already decided to get back into DOW (the stock, not the average) before I spotted this list. I made some pretty decent money on this one in 2021, don’t own it now, but plan to get into it soon, depending on the kind of pricing we get during Mr Market’s opening week, 2022.

Ditto VZ and CVX. Maybe IBM. Like Dow, I traded this one for a profit in 2021 and am currently out of it. But the gods may once again shine on this onetime Dow giant, so if the price of this and others are “right” next week or so, I’ll give these a try as well. And I’ll let you know what I did when and if I do it. No guarantees, though. Ever.

Finally, I’ve successfully invested in a Dow Dogs alternative from time to time over the past few years. It’s an ETF known as the ALPS Sector Dividend Dogs ETF (NYSE: SDOG). This broader-based ETF can often prove more successful than the original Dow Dogs theory stocks. While incorporating some of the Dow Dogs, this ETF also incorporates other large, high-dividend paying companies that are listed in each of the S&P: 500’s 11 industry sectors. In the end, however, both the Dow Dogs and SDOG are dividend based stock strategies. Their main virtue, if an investor fears a volatile investing year, is that the strategies behind them — mainly, big dividends — tend to make them less volatile in times of trouble.

SDOG: Here’s how CNBC describes this investment.

“The Fund seeks investment results that replicate as closely as possible the performance of the S-Network Sector Dividend Dogs Index. The Index is a rules-based index intended to give investors a means of tracking the overall performance of the highest dividend paying stocks in the S&P 500 on a sector-by-sector basis.”

SDOG’s broader coverage makes this ETF less potentially volatile than your own selection of Dow Dogs. Plus, its broader scope gives you more of a chance of coming out ahead when you sell these shares. But again, not guaranteed, please.

FYI the closing yield on SDOG as closely as I can calculate it was between 3.87 and 4.35% payable quarterly, as of December 31, 2021. (Dividend payouts can vary on some of SDOG’s holdings, while they generally remain roughly the same for the Dow Dogs. But your mileage may vary.)


Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17