Here's the latest entry in our on-going quest to find great personal finance posts and point you to them.
Today I found a post on Money-Zine.com about the Dogs of the Dow investing strategy.
The post does a great job of summarizing this well-known theory:
"The Dogs of the Dow Theory is really quite simple. The Dow Jones Industrials is a prestigious list of companies to begin with. By sorting these stocks to find the ten companies with the highest dividend yield, you are automatically choosing companies that are undervalued relative to their peers. By refreshing the list each year, you're always picking new "dogs" - the ones that stand the greatest chance of catching up with their peers.
O'Higgins examined the performance of these puppies by looking at the performance of these sets of stocks over a 17 year time period. He compared the performance of a portfolio of ten stocks with that of the rest of the Industrials Index. He found that the average annual return for the Dogs of the Dow was 17.9% compared to 11.1% for the rest of the Dow.
So to summarize, in this theory we have a combination of large cap stocks, paying high dividend yields that seem to be undervalued relative to their peers."
The rest of the post tells how to choose the Dogs of the Dow and what the Dogs of the Dow are for 2005. It's a good, solid overview of a long-held investment strategy. It's certainly a Star Money Article.
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