How to Utilize The Small Dogs of the Dow Strategy

At the beginning of 2015 you have a rare opportunity to vastly increase your income using what might be the simplest investment strategy ever.
And as you’ll see, this strategy works incredibly well over the long term. We know that most people like to think they’re “long-term” investors, but we also know that the average holding period for stocks is less than six months.
But if you are a long-term investor (or you’d like to be), here are the full details of how you can beat the market…
I call it “The Small Dogs of the Dow.”
The Small Dogs of the Dow is a simple and effective strategy that has outperformed the Dow and the S&P 500 significantly over the last 20 years. Take a look:
“Small Dogs” of the Dow

Investment 1 Year 3 Year 5 Year 10 Year 20 Year
Dogs of the Dow 16.3% 17.9% 3.4% 6.7% 10.8%
Small Dogs of the Dow 19.2% 18.0% 1.8% 7.7% 12.5%
Dow Jones 8.4% 15.0% 4.4% 6.1% 10.8%
S&P 500 2.1% 14.5% 2.4% 5.0% 9.6%

So what is the “Small Dogs of the Dow?” And how does it work?
First, you must understand the Dogs of the Dow. These are the 10 highest yielding stocks in the Dow Jones Industrial Average. The Dogs of the Dow strategy recommends buying these 10 high-yield Dow stocks at the beginning of each year, and rebalancing annually.  That’s just one transaction per year…
The “Small Dogs of the Dow” offers a slight twist on this winning investment strategy. And the results are certainly worth your attention.
One of the key attractions of using this conservative strategy is that it requires very little research or time. Simply take the five lowest-priced Dogs of the Dow stocks and invest an equal sum in each stock.
Every year, the whole process starts over. Oftentimes, most of the stocks will remain on the list from one year to the next, simplifying things from a taxation perspective (no gains or losses to report) and also helping to lower commission costs.
In order of current yields, the 2015 Small Dogs of the Dow are made up of the following stocks:

Stock Ticker Yield
AT&T T 5.85%
Verizon VZ 4.83%
Pfizer PFE 3.40%
General Electric GE 3.76%
Coca-Cola KO 3.02%

Of particular interest to income investors is the fact that the Dogs start every year with a distinct advantage over the rest of the Industrials. This time around it’s a combined average yield of nearly 4.2%. Compare this with a yield of 2.7% for the Dow Jones Industrial Average as a whole, and the income advantage is clear.
If you are interested in further increasing your Small Dogs of the Dow performance, please consider taking a look at my High Yield Trader newsletter.
In the publication I focus on doubling, tripling, even quadrupling the dividend in many of the Small Dogs stocks through the use of two different options strategies: selling puts and covered calls.
In 2014 we managed to double the dividend in AT&T and General Electric, triple the dividend in Intel and created six times the dividend in Microsoft. We didn’t have Pfizer in the portfolio, but just added it to the mix for 2015. I’ll also be adding the new additions to the portfolio at the onset of the New Year.
If you are interested in learning more, please click here.

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