Here's a different approach to making money on dividend stocks

Dividend strategies on Wall Street go to the dogs in January. But there appears to be a better way. I’m referring to the so-called “Dogs of the Dow” strategy, which calls for investing each January in the 10 stocks from the Dow 30 with the highest dividend yields. It got its name because the stocks it recommends are typically out of favor on Wall Street. Over many decades of backtesting, the strategy outperformed the Dow itself.

A funny thing happened on the way to the bank over the past decade, however. Over the 10 years through the end of last year, for example, the Dogs of the Dow strategy has produced a 6.8% annualized gain (as judged by the Dow Jones High Yield Select 10 Index), assuming dividends were reinvested. That’s 0.7 percentage points per year behind the dividend-adjusted return of the Dow Industrials itself. The best-performing dividend-stock strategy among those I monitor has done markedly better. This superior approach is the one recommended by an investment advisory newsletter called Investment Quality Trends, edited by Kelley Wright. Over the past 10 years, according to Hulbert Ratings, its model portfolio of dividend-paying stocks has produced an 8.1% annualized return.

Source: USA Today

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