In 2018, Michael Cannivet ( Silverlight Asset Management) introduced his version of the “Dogs of the Dow” strategy, the “Dobermans of the Dow”.
The “Dogs of The Dow” is an investing strategy that consists of buying the 10 stocks with the highest dividend yield out of the Dow 30 at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks.
Strategy rules
The “Dobermans of the Dow” version adds some rules looking for a sustainable growth rate, by focussing on variables such as Return on Equity (ROE), Free Cash Flow, and Reinvestment Rate (1 – Dividend Payout Ratio).
Dobermans of the Dow version is based on two steps:
Step 1: Rank Dow constituents by Return on Equity (ROE), keeping the top 20.
Step 2: Rank remaining names by Free Cash Flow (FCF) Yield, keeping the top 10.
In the end, this will approach will give you 10 stocks of the Dow-30, which you should hold for one calendar year.
Performance Dobermans of the Dow
The “Dobermans of the Dow” did beat the Dow index in 19 of the last 22 years. The classic variant of the Dogs realized a return of 19.7% in 2019 compared to 25.3% for the Dow Jones. The Dobermann strategy outperformed both with an excellent 29.6%.
Below are the 2020 Dobermans of the Dow listed:
Other Sources of Dividend Investment Ideas
The Dividend Aristocrats list is not the only way to quickly screen for businesses that regularly pay rising dividends.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of less than 20 businesses with 50+ years of consecutive dividend increases.
- The MoneyInvestExpert Defensive Aristocrats is a performance-based top-10 selection of the Dividend Aristocrats to outperform the market on the long-term.
- Portfolio lists like the Berkshire Hathaway Portfolio or Bill Gates’stock portfolio can be a source.
- For the European focused investors there is also the list of European Dividend Aristocrats.
- Dividend Champions are not necessarily members of the S&P 500 index, have increased their dividend for 25 or more consecutive years.
- 100+ years of dividend, the list of stocks that pay over 100 year of dividend can be an list of inspiration.
Next to selecting the right dividend stocks, important principles for successful long-term investing are Disciple, Diversification, Defensive & indeed Dividend. Read more about this in our free e-book.
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