Most investors have probably heard of the Dogs of the Dow strategy. Rank the dividend-yielding Dow Jones Industrial Average stocks from highest to lowest yield and buy the top 10. Hold for one year and a day and sell. Then do it all over again. This strategy was all the rage back in the early 1990s, and for good reason. The strategy had a market-beating track record and only required about an hour per year to pick the stocks. However, the strategy faltered when the market went nuts in the late 1990s, causing investors to lose interest.
As of Dec. 31, 2009, the Dogs of the Dow strategy has produced annual returns of 9%, 3.2%, and 1.1% over the past 15 years, 10 years, and five years, respectively. What if we applied this to the S&P 500, an index of 500 stocks compiled by Standard & Poor's that includes "leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities." While the S&P 500 also has some non-dividend paying stocks, 372 (74.4%) of the companies in the index pay dividends.
Source: Motley Fool
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