Thanks to the Investing Channel, here is a list of this year’s Dogs of the Dow. The strategy popularized by Michael B. O’Higgins in 1991 and represents the top 10 dividend yielding stocks in the Dow Jones Industrial Average at the beginning of the year. Owning 10 stocks amounts to a third of the already narrow 30 stock index.
AT&T (NYSE: T): Price $33.71; Dividend Yield 5.34%. AT&T raised its quarterly dividend 2.3% to $0.45/share with its last announcement on 11/7. The dividend will be payable on February 1, 2013, to stockholders of record on January 10, 2013, with an ex-dividend date of January 8, 2013.
Verizon Communications Inc. (NYSE: VZ): Price $43.27; Dividend Yield 4.76%. Verizon raised its quarterly dividend 3% to $0.515/share with its September announcement.
Intel Corporation (Nasdaq: INTC): Price $20.62; Dividend Yield 4.36%. Intel raised its quarterly dividend 7.1% to $0.225/share with its July announcement.
Merck & Co. Inc. (NYSE: MRK): Price $40.94; Dividend Yield 4.20%. Merck raised its quarterly dividend 2.4% to $0.43/share with its November announcement.
Pfizer Inc. (NYSE: PFE): Price $25.08; Dividend Yield 3.83%. Pfizer raised its quarterly dividend 9.1% to $0.24/share with its December announcement.
DuPont (NYSE: DD): Price $44.98; Dividend Yield 3.82%. DuPont raised its quarterly dividend 4.9% to $0.43/share with its April announcement.
Hewlett-Packard (NYSE: HPQ) Price $14.25; Dividend Yield 3.72% (*NEW). HP raised its quarterly dividend 10% to $0.132/share with its May announcement.
General Electric (NYSE: GE): Price $20.99; Dividend Yield 3.62%. GE raised its quarterly dividend 11.8% to $0.19/share with its December announcement.
McDonald’s Corp. (NYSE: MCD): Price $88.21; Dividend Yield 3.49% (*NEW). McDonald’s raised its quarterly dividend 10% to $0.77/share with its September announcement.
Johnson & Johnson (NYSE: JNJ): Price $70.10; Dividend Yield 3.48%. Johnson & Johnson raised its quarterly dividend 7% to $0.61/share with its April announcement.
Through 2011, the 20 performance on the Dogs of the Dow strategy equaled that of the DJIA itself (10.8% vs. 10.8%), and slightly outperformed the S&P. The strategy lagged the DJIA and the S&P in 2007 and 2008, but otherwise had done well as an enhanced index strategy. 2012 was another underperforming year. The Dogs strategy returned a capital appreciation of 6.2% added to a beginning of the year 4.2% dividend yield this past year compared to the S&P’s 14%. The biggest laggard was clearly Intel (INTC) which was down almost 17% in 2012.
The volatile Intel remains in the Doggy group with the addition of another tech-darling, Hewlett-Packard (HPQ), which itself took a tumble on its announcement of fraud allegations and $8.8 billion accounting charge at its Autonomy unit. Recently, Hewlett-Packard has confirmed that the U.S. Department of Justice opened an investigation on Nov. 21 relating to Autonomy, an enterprise search company that H-P acquired in October 2011. How H-P handles the post-Autonomy meltdown will greatly influence the Dogs of the Dow Strategy for 2013. It’s off to a good start as HPQ is up 5% on the opening of trading in the new year.
The 10 cheapest stocks of the DJIA have an average dividend yield of 3.8% as well as a forward P/E ratio of 12.1x and an average Price-to-Book ratio of 2.4x.