The Dogs of the Dow Worked Last Year, But This Strategy Could Make You More Money in 2023

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If it ain’t broke, don’t fix it. Investors who managed to profit in 2022 during a dismal year for most stocks will probably want to stick with their same approach this year.

One winning strategy last year was the Dogs of the Dow. The idea is to buy shares of the 10 stocks in the Dow Jones Industrial Average with the highest dividend yields. Following this approach delivered a total return of close to 2% — much better than the Dow’s negative total return of nearly 7%. 

The Dogs of the Dow worked last year. But another strategy could make you more money in 2023.

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Dueling dogs

The Dogs of the Dow for 2023 are nearly the same as in 2022. Coca-Cola and Merck were replaced. However, eight others remained. Here’s the full list for 2023:

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Stock Dividend Yield 
Verizon Communications (NYSE: VZ) 6.6%
Dow (NYSE: DOW) 5.6%
Intel (NASDAQ: INTC) 5.5%
Walgreens Boots Alliance (NASDAQ: WBA) 5.1%
3M (NYSE: MMM) 4.9%
IBM (NYSE: IBM) 4.7%
Amgen (NASDAQ: AMGN) 3.2%
Cisco Systems (NASDAQ: CSCO) 3.2%
Chevron (NYSE: CVX) 3.1%
J.P. Morgan Chase (NYSE: JPM) 2.9%


There’s a reasonable level of diversification in this group. The communications, energy, and financial services sectors have one member each — Verizon, Chevron, and J.P. Morgan Chase, respectively. Amgen and Walgreens provide a healthcare flavor. Industrials are represented by Dow and 3M. Cisco, IBM, and Intel carry the banner for the technology sector.

However, I think a different strategy could outperform the Dogs of the Dow this year. Instead of buying the 10 highest-yield stocks of the Dow, go with the 10 highest-yielding stocks in the S&P 500. Meet the “Dogs of the S&P”: 

Stock Dividend Yield
Pioneer Natural Resources (NYSE: PXD) 11.5%
Coterra Energy (NYSE: CTRA) 10.5%
Vornado Realty Trust (NYSE: VNO) 9.9%
Devon Energy (NYSE: DVN) 8.6%
Altria Group (NYSE: MO) 8.3%
V.F. Corporation (NYSE: VFC)  6.9%
Verizon Communications 6.6%
Newell Brands (NASDAQ: NWL) 6.5%
Simon Property Group (NYSE: SPG) 6.1%
Boston Properties (NYSE: BXP) 6.1%

Source: Finviz.

Why the Dogs of the S&P could have more bite

To be sure, these 10 Dogs of the S&P didn’t perform nearly as well as the 2022 Dogs of the Dow did last year. Their average total return was negative 8.9%. But I think they could have more bite in 2023.

Note that three of the Dogs of the S&P are oil and gas stocks — Pioneer Natural Resources, Coterra, and Devon. Oil prices have declined in recent months. However, the U.S. Energy Information Administration projects that the average Brent crude oil price for 2023 will rise by roughly 18%. That should cause shares of Pioneer, Coterra, and Devon to move higher.

Another three members of the group are real estate investment trusts (REITs) — Vornado, Simon Property Group, and Boston Properties. These stocks sank last year, in large part because of rising interest rates. However, some Wall Street analysts think that the Federal Reserve could pivot in the second half of 2023. If this happens, look for the REIT stocks to take off.

Tobacco giant Altria beat the market last year. I expect it will continue to be viewed as a safe haven in what could be another turbulent period in 2023. Verizon is in both the Dogs of the Dow and the Dogs of the S&P, so it won’t impact the relative performance between the two strategies.

That leaves only apparel maker V.F. Corporation and consumer products company Newell Brands. I don’t have great expectations for either stock. However, they shouldn’t weigh down the rest of the group too much.

Also, don’t overlook the fact that the average dividend yield of the Dogs of the S&P is 8.1%. That’s a lot higher than the 4.5% average dividend yield of the Dogs of the Dow. This higher yield will boost the total return of the Dogs of the S&P.

Barking up the wrong tree?

Now for the reality check. It’s quite possible that my assumptions are dead wrong. Oil prices could fall in 2023 more than they already have. This could result in companies such as Devon and Pioneer reducing their dividends. The Fed could continue raising interest rates throughout the year with no pivot in sight. 

However, if oil prices drop and interest rates keep going up, it will probably be because of a recession and sustained high inflation. My hunch is this environment could negatively impact the stocks in the Dogs of the Dow even more than it would those in the Dogs of the S&P.

I don’t think I’m barking up the wrong tree at all with this alternative investing strategy. It just might make you more money in 2023 than the Dogs of the Dow will.


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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Devon Energy. The Motley Fool has positions in and recommends Cisco Systems, Intel, JPMorgan Chase, and Merck. The Motley Fool recommends 3m, Amgen, Pioneer Natural Resources, Simon Property Group, and Verizon Communications and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2024 $47.50 calls on Coca-Cola, long January 2025 $45 calls on Intel, and short January 2025 $45 puts on Intel. The Motley Fool has a disclosure policy.

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