Invest in the Dow Dogs? Do you wonder what that means?

“Dow Dogs” or “Dogs of the Dow” refers to an investing strategy that buys and holds equal dollar amounts of the 10 highest-yielding dividend stocks of the Dow Jones Industrial Average (^DJI). The strategy counts on the idea that blue-chip stocks with high yields are near the bottom of their business cycle and will hopefully do much better going forward. Investors in the strategy then would not only get large dividends but also gains in the stocks price.

Investing in the Dogs of the Dow is relatively simple. After the stock market closes on the last day of the year, of the 30 stocks that make up the Dow Jones Industrial Average, select the ten stocks which have the highest dividend yield. Then simply get in touch with your broker and invest an equal dollar amount in each of these ten high yield stocks. Then hold these ten “Dogs of the Dow” for one year. Repeat these steps each and every year. That’s it!

Small Dogs of the Dow?

Yes, there is a spin on the Dow Dogs strategy. Small dogs are simply buying equal dollar amounts of the five lowest priced Dow Dogs.

The 2012 Dow Dogs

T – AT&T, $30.24, Yield: 5.82%
VZ – Verizon, $40.12, Yield: 4.99%
MRK – Merck, $37.7, Yield: 4.46%
PFE – Pfizer, $21.64, Yield: 4.07%
GE – General Electric, $17.91, Yield: 3.80%
DD – DuPont, $45.78, Yield: 3.58%
JNJ – Johnson & Johnson, $65.58, Yield: 3.48%
INTC – Intel, $24.25, Yield: 3.46%
PG – Procter & Gamble, $66.71, Yield: 3.15%
KFT – Kraft, $37.36, Yield: 3.10%

The 2012 Small Dow Dogs

GE – General Electric, $17.91, Yield: 3.80%
PFE – Pfizer, $21.64, Yield: 4.07%
INTC – Intel, $24.25, Yield: 3.46%
T – AT&T, $30.24, Yield: 5.82%
KFT – Kraft, $37.36, Yield: 3.10%