- The "Dogs of the Dow" has returned an average of 16.1% year to date, compared with our SWAN-packed Durable Income Portfolio, which has returned 20.73%+.
- We thought it would be interesting to create our own “Dogs of the Dow” in a REIT wrapper.
- In fact, a follower asked us to develop a customized version, so we named it “The Unloved SWAN List”.
- Looking for a portfolio of ideas like this one? Members of iREIT on Alpha get exclusive access to our model portfolio. Get started today »
I’m sure most of you are familiar with the Dogs of the Dow, a familiar stock-picking strategy that was first published in 1991. The primary blueprint behind this concept is to allocate capital to the 10 highest dividend-yielding, blue-chip stocks that make up the Dow Jones Industrial Average (DJI).
Recognizing that the DJIA consists of a wide variety of sectors - such as financial, technology, consumer goods, healthcare, energy, and materials - it's known to be one of the most stable market benchmarks.
Although REITs have been on fire year to date (as measured by the Vanguard Real Estate ETF (NYSEARCA:VNQ) below), the DJIA has outperformed the higher-yielding counterparts by a wide margin over the last two, five, 10, and 15 years.
Keep in mind, the DJIA is a collection of 30 stocks and the Dogs of the Dow list is limited to just 10 companies that are picked at the beginning of each year. This list of 10 is sorted by their dividend yield: They are put in order from the highest yield to lowest. This strategy attempts to maximize the yield by buying the highest-paying dividend stocks (and conversely the lowest multiple) available from the DJIA list.
According to the website, Dogs of the Dow,
...since the turn-of-the-century, the Dogs of the Dow have an average annual total return of 9.0%. This compares favorably to the average annual total return of the Dow Jones Industrial Average of 7.5%.
Here’s a snapshot of the 2019 Dogs of the Dow list:
Source: Dogs of the Dow website
Keep in mind, we research most all of these blue-chip stocks on The Dividend Kings, and this basket of popular names has returned an average of 16.1% year to date, compared with our SWAN-packed Durable Income Portfolio, which has returned 20.73%+ year to date.
Keep in mind, our Durable Income Portfolio has over 30 companies (like the Dow) and it consists of around 55% blue-chip exposure. The reason we opt to overweight this particular portfolio with higher-quality names is that it has delivered exceptional results, returning an average of 20.65% since inception (August 2013).
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