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The first half of 2021 most dividend stock price actions exceeded all analyst expectations. The 2022 September-December slump freed-up five or more Dow dogs, sending them into the ideal zone where returns from $1k invested equal (or exceed) their single-share price. He is a self-taught investor and blogger on dividend growth stocks and financial independence.
Market psychology is crucial in identifying trends, making subsequent analysis relatively straightforward. Moreover, incorporating the fundamental principles of contrarian investing can elevate trading skills to new heights, especially when combined with the collective wisdom and technical analysis. https://g-markets.net/helpful-articles/candle-signs-and-flame-meanings-for-candle-magic/ The Dogs of the Dow strategy has been rewarding investors for the past 20 years with a 10.8% return. This return is the same as the total Dow Jones Industrial Average over the same period. If you’re an investor looking to minimize expenses, consider checking out online brokerages.
Sizzling ‘Strong Buy’ Stocks Under $10, and ARK’s Cathie Wood Loves 3 of Them
The Beta number showed this estimate subject to risk/volatility 63% less than the market as a whole. Six of ten top dividend-yielding Dow dogs (tinted gray in the chart below) were among the top ten gainers for the coming year based on analyst 1-year target prices. So, this June, 2023 yield-based forecast for Dow dogs, as graded by Wall St. wizard estimates, was 60% accurate.
Moreover, Amgen has pursued a strategy of acquiring smaller companies and gaining access to new molecules, compounds and therapies. Since 2021, Amgen has acquired ChemoCentryx, Tenebio and FivePrime Therapeutics in multi-billion-dollar deals. We can’t retire off of 4.5% in annual yield—a “perfect” amount of portfolio income is closer to 7%. Even if we put a million bucks to work on the Dogs, we’d still only be netting $45,000 a year. But just like that, in a disastrous 2022, the Dogs stood up when just about everything—including the industrial average itself—fell down.
Dogs Of The Dow 2023: what is this all about?
Prolia, which treats osteoporosis and should become the top-grossing product sometime this year, grew 14% due to 11% volume growth and higher average prices. Osteoporosis diagnoses in the U.S. are now nearly back to pre-COVID-19 levels, a slight sequential improvement. On January 31st, 2023, Amgen announced fourth-quarter and full-year results.
Looking ahead, the 2023 Dow Dogs of the Dow strategy may continue to outperform the DJIA – but it might not. If it does, it will likely be due to the attractive dividend yields that these stocks offer. The Dow Dogs of the Dow strategy is an investment approach which involves buying an equal dollar amount in the 10 highest-yielding Dow stocks at the start of each year and holding them for a year.
Similarly, Coca-Cola (KO 1.10%) stock rose 8% on strong investor appetite for consumer staples stocks. First, the dividend yields are relatively high, leading to an initial advantage compared to stocks with lower dividend yields. Second, a stock often has a high dividend yield because the price has fallen. This occurs either due to sector or company-specific difficulties.
The Dogs of the Dow is both seen as a dividend strategy as well as a value strategy. Stocks on the list does not necessarily mean they performed poorly the year prior, but rather that they pay a high yield. Given the current state of the economy and the rising rate environment we are going through, banks could prove to be a great investment. Intel is a quality company that has had failed execution and 3M has plenty of legal issues to deal with, so both of those stocks have some risks that come along with them. JPMorgan Chase (JPM) is the third Dog of the Dow for 2023, and easily considered the safest investment between the three stocks we have looked at today.
Dow noted that it would lay off about 2,000 employees globally as it aims to reduce costs by $1 billion in 2023. Due to the dour outlook, we project just $3.15 of earnings-per-share this year. Dow reported fourth-quarter earnings on January 26th, 2023, and the results were weak. Product revenue increased 4% on higher volume for key products. On December 12th, 2022, Amgen announced a 9.8% quarterly dividend increase to $2.13. Management noted that it would target $12 billion in share repurchases this year, helping to drive our initial estimate of $12.00 in earnings-per-share for 2023.
This means that the dividend, as opposed to a company’s current stock price, is the better measure of a company’s average worth. Adherents of the Dogs strategy assume that the highest yielding Dow stocks are unfairly and temporarily depressed. Adding the Dogs stocks’ 4% average dividend yield coming into 2022 plus their average 1.8% drop still left investors with a positive return of more than 2% on the stocks. Additionally, half of last year’s Dogs, including International Business Machines (IBM), Chevron (CVX), Merck (MRK), Amgen (AMGN), and Coca-Cola (KO) posted gains in 2022. Yet for some investors, the prospect of owning solid stocks with an average dividend yield of 4.4% is too good to pass up. Regardless of whether the Dogs of the Dow outperform the stock market in 2023, many will find that the simple strategy gives them an easy way to get market exposure without a lot of hassle.
Dogs of the Dow #2: Dow
Recently, Amgen announced the nearly $28 billion cash and debt deal for Horizon Therapeutics, growing the portfolio with the Tepezza blockbuster drug, several others with sales and a robust pipeline. The firm is a leader in mainframes, hybrid cloud, transaction processing and global consulting. Along these lines, VillageMD recently acquired Summit Health for primary care, Shields for specialty care and CareCentrix for post-acute care.
- Hold these stocks for a whole year and then at the end of 12 months, look at the 30 Dow stocks again and resort them by dividend yield from highest to lowest.
- The strategy relies on the idea that blue-chip stocks with high dividend yields are temporarily undervalued and will eventually rebound to their intrinsic value.
- Today, he provides his followers insights to both undervalued dividend stocks mixed with high-growth opportunities with a goal of them reaching financial freedom in the long-term.
- This means that the dividend, as opposed to a company’s current stock price, is the better measure of a company’s average worth.
- The latest example was in 2021 when the company spent nearly $46 billion – more than any other major telecom company – on broadband licenses in anticipation of a 5G world that has yet to materialize.
As we saw above, Intel was the worst performing stock out of all 10 Dogs of the Dow. The company has gone through a lot of changes and delays in the recent years, which has led to a loss of market share. Advanced Micro Devices (AMD) has been progressing fast in the chip space, and is right on the cusp of surpassing INTC when it comes to market cap.
Dogs of the Dow #9: Chevron
Added to the simple high-yield “dog” metrics, analyst median price target estimates provided another tool to dig out bargains. The average net gain in dividend and price was estimated at 24.91% on $10k invested as $1k in each of these top ten Dow Index stocks. This gain estimate was subject to average risk/volatility 13% less than the market as a whole. United Health Group Inc (UNH) netted $181.47 based on the median of target price estimates from 24 analysts, less broker fees.
- 3M is known for having a diversified portfolio of products, more well-known for items like their post-it notes, masks, scotch tape, and MANY other products.
- The success of the Dogs of the Dow has a lot of investors taking a closer look at the strategy to see if it can keep outperforming in the coming year.
- For investors, that leaves software and consulting as the businesses to watch, which were up 7.5% and 5.4%, respectively, in the last quarter.
- That said, Intel introduced Sapphire Rapids in its Xeon series of chips for data centers.
By region, the Americas grew 9%, Europe/Middle East/Africa increased by 5%, and Asia-Pacific/Japan/China was up by 1%. Cisco repurchased 26 million shares at an average price of $47.72 during the quarter. The company remaining share repurchase authorization is $13.4 billion, or 6.5% of the current market cap. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites.
As cash returned to shareholders can be reinvested in the common stock of a particular company, investors benefit from high-yield companies as a group. Naturally, shareholders would prefer to reinvest a business’s earnings into more ownership of a business rather than see the cash sit in the company’s bank accounts for a paltry .5% annual return. You can see the value emphasis in the Dogs of the Dow strategy from the dividend stocks that joined and left the list in 2023. Merck (MRK 1.13%) had a huge year, with its stock jumping 45% as prospects for several of its approved and pipeline drugs improved dramatically in 2022. The soaring share price sent Merck’s dividend yield down almost a full percentage point.
The company has a focus on investment banking but competes in a wide variety of service activities to a diverse and broad base of global customers. This is a great and simple strategy for value investors looking to purchase good businesses that are currently out of favor. However, the Dogs of the Dow strategy underperform for some periods. For example, the annualized return was about 9.2% compared to approximately 16.0% for the S&P 500 Index in the past decade through 2021. The Dogs of the Dow website is primarily dedicated to the investing strategy. In addition, you can review the Dogs of the Dow website for past year lists.
Here’s Why the Dow Dogs May Be Crowned Best in Breed in 2023
The alternative, of course, could be that these companies raise their dividends. That however appears to be too much to ask in these highly disrupted, inflationary, recessionary, yet cash-rich times. Mr. Market is much more effective at moving prices up or down to appropriate amounts, just watch and buy when the targeted stock price moves to a sweet spot. We emphasize dividend yield, conservative payout ratio and valuation in our five picks. These five stocks make great choices for investors seeking higher yields at a reasonable price to generate dividend income. The strategy assumes the stocks are temporarily mispriced, and thus the yields are high.
Of course, you and I know that high yields don’t mean a stock is a value—sometimes they just mean a stock is cheap. The Dogs strategy showed cracks in 2019, really fell off the rails in 2020 and came up short again in 2021. To begin with, the Dow is one of the oldest and most closely followed stock exchanges in the world. The Dow Jones Industrial Average (DJIA) is an index of 30 blue chip stocks. The DJIA is intended to serve as a barometer for how the general economy is performing, and more specifically, how the stock market is performing.
And if you are waiting for the chemical business to come back, getting paid just over 6% is a tenable position for many investors. Intel (INTC, $29.87) has been one of the most severely hit names in a terrible year for the tech sector. The stock is down 42% for the year-to-date, following a disappointing second-quarter performance where its EPS was off 79% year-over-year, and revenue dropped 17%.