Our Prudent Preliminary 2017 ‘Dogs of the Dow’

Here is our preliminary “Dogs of the Dow” list, 2017 edition, an annual time-tested strategy for picking winning stocks (much of the time) from this year’s stock market trash bin.

Who let the dogs out? The Dow, that's who. Our preliminary Mighty Dogs of the Dow. (Image via Wikipedia. CC 3.0 and not exclusive)

WASHINGTON, December 28, 2016 – In a recent column, we provided you with our preliminary (and likely final) list of stocks comprising our 2017 Bounceback candidates. (More here.) These are often perfectly good stocks that had a bad year, are likely to have a promising one in 2017, but that got smithereened by traders looking to do tax-loss selling near the end of the current year.

Read also: Trump-Santa Claus Rally running out of Christmas cheer?

Today’s column offers our preliminary “Dogs of the Dow” listing of stocks, a list that’s built, perhaps, on a similar proposition. The “Dogs of the Dow” is the name given to an investment strategy made popular by investment guru Michael B. O’Higgins back in 1991. So the theory goes, if an investor looks at the 30 Dow Jones Industrial stocks on the last trading day of the year after close of business—in this case, December 30, 2016—and buys the ten stocks in that list paying the highest dividends as a percentage of their closing prices early in the New Year, he’ll have a profitable mini-portfolio by the end of that year.

As we’ve noted: so the theory goes. It doesn’t work all the time. Alas, one or more of those Dow Dogs will end up buried even further on the last trading day of the upcoming New Year. (That’s what happened to 2016 Dow Dog Nike—symbol: NKE.) But the Dogs of the Dow theory often works, often enough to prove appealing to those investors who want at least part of their portfolio to be “purchase and forget” for the next 365 days or thereabouts.

Given that, at least according to the theory, Dow Dogs at least have to pay something resembling a half-decent dividend, at least owners of these stocks will get a consolation prize if the capital gains themselves don’t work out.

Over the years, there have been many variations on O’Higgins’ original theory, most of which attempt to or claim that they have improved on that model. There are Dogs of other averages, Dogs determined by other means, you name it.

Today, you can even buy an ETF that holds a 21st Century flavor of the original Dogs: The ALPS Sector Dividend Dogs ETF, whose easily-remembered trading symbol is SDOG. SDOG picks a selection of Dogs from all averages and appears to have done rather well as 2016 sputters to a close.

If you’d bought SDOG shares in early January at around $35 per share, you’d have first taken part in the markets’ sickening, near-universal January-February bloodbath which took these shares down a good 5 points in only a couple of weeks to $30.77. But if you white-knuckled those shares and didn’t sell, you’d find SDOG sitting pretty today at $42 and change, a roughly 18.5 percent profit year-on-year. Not bad, really, and in fact, quite good and much better than the average stock picker did in 2016.

But again, none of this dog stuff works all the time, so always look before you leap.

Meanwhile, as the Prudent Man’s annual service to readers, we present our preliminary 2017 Dogs of the Dow, with the caveat that the last trading day of the year can cause a little shuffling before we produce the final list, depending on where all these stocks—and nearby also-rans—actually close.

The Prudent Man’s Preliminary 2017 Dogs of the Dow (in alpha order):

Stock/Trading Symbol:

  • Boeing Co. (BA)
  • Chevron Corporation (CVX)
  • The Coca-Cola Co. (KO)
  • Cisco Systems, Inc. (CSCO)
  • Exxon Mobil Corporation (XOM)
  • International Business Machines Corp. (IBM)
  • Pfizer Inc. (PFE)
  • Procter & Gamble Co (PG)
  • Verizon Communications Inc. (VZ)
  • Wal-Mart Stores, Inc. (WMT)
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