The Dogs of the Dow is an investing strategy well-known to retail and institutional investors. The ten stocks from the Dow 30 that have the highest yield on the last day of the previous year comprise the Dogs of the Dow for the following year. Before diving into the list of the Dogs of the Dow in 2025, let’s first understand its history.
History of the Dogs of the Dow
The concept of investing in the highest-yielding Dow 30 or Dow Jones Industrial Average stocks was reportedly popularized by Michael B. O’Higgins in his book “Beating the Dow,” published in 1991. These stocks are considered “dogs” or not desirable for investors. However, the investing strategy argues that these stocks can have significant gains in price plus relatively high dividend yields. This occurs because the stocks are thought to be temporarily oversold.One of the first published the Dogs of the Dow lists is from 1996 and included Philip Morris (MO), Texaco (TX), JP Morgan (JPM), Chevron (CVX), Exxon (XON), Dupont (DD), 3M (MMM), International Paper (IP), General Electric (GE), and Eastman Kodak (KODK).
The Dogs of the Dow 2025
The list of the Dogs of the Dow 2025 is given in the table below. The list is based on data from December 31, 2024, when the Dogs of the Dow for 2025 were identified. The average yield at the start of 2025 was 3.53%, more than twice the average of the S&P 500 Index.One interesting point is that by following this strategy, 30% of a portfolio would be in the Healthcare sector, while 20% would be in the Technology sector. So, this portfolio is a concentrated one. Note the Dogs of the Dow 2025 list is static for the year, meaning it does not change until 2025.
Six of the ten stocks on this list were on the Dogs of the Dow 2024. The three changes were Walgreens Boots Alliance (WBA), Dow (DOW), 3M Company (MMM) dropped off the list, and Merck (MRK), McDonald’s (MCD), and Procter & Gamble (PG) were added to it.Walgreens Boots Alliance cut its dividend and was removed from the Dow Jones Industrial Average (DJIA). Similarly, 3M reduced its dividend and its dividend yield decreased. The Dow chemical company went through a period of restructuring and was eventually removed from the list.
How Does the Dogs of the Dow Investing Strategy Work?
According to the Dogs of the Dow website,“Dogs of the Dow is a stock picking strategy devoted to selecting the highest dividend paying Dow stocks.”The general idea for the Dogs of the Dow strategy is to make stock picking simple and relatively safe. The Dogs of the Dow focuses on blue-chip stocks paying a dividend. The strategy is also meant to be a long-term strategy requiring less effort than constant trading. The Dogs of the Dow pay dividends, and a few are dividend growth stocks, but it is not strictly a dividend growth investing strategy.The investing strategy requires a person to have equally weighted positions in the ten Dogs of the Dow. For example, at the end of the calendar year, an investor should select the ten highest-yielding Dow 30 stocks. Then, they rebalance their portfolio at the beginning of the new year to return to a 10% allocation for each stock. A person may also need to sell stocks no longer in the Dogs of the Dow due to changes in the Dow 30 or price appreciation and corresponding declines in dividend yield. Note that equal weighting means that the strategy does not follow the same principle of price weighting as the underlying index.The Dogs of the Dow strategy assumes blue-chip companies do not change their dividend to reflect the normal business cycle. On the other hand, stock prices reflect the business cycle. Hence, high yields and low stock prices should mean that a company is at the bottom of the business cycle, while low yields and high stock prices should mean a company is near the top of the business cycle.
Limitations of Dogs of the Dow
The Dogs of the Dow strategy sounds simple, but it takes some effort, like most things related to portfolio management. Also, it is not an indexing strategy. Similar to most do-it-yourself (DIY) strategies, there is an active element. That said, the actual trading and rebalancing are limited to a small part of the calendar year. The method maximizes yield in a relatively small universe of 30 blue-chip stocks. Hence, your portfolio may not be diversified across sectors. Furthermore, the strategy can lead to a concentrated portfolio in a limited number of sectors, especially if one is out of favor, e.g., oil majors during the COVID-19 pandemic.
Does the Dogs of the Dow Strategy Work?
Investors want to know the answer to the question, Does the Dogs of the Dow strategy work? The answer seemingly is yes despite the limitations and general criticism of the Dow 30 and Dogs of the Dow.O’Higgins back-tested the strategy to the 1920s and found that the Dogs of the Dow outperformed the broader market. For instance, between 1992 and 2001, the Dogs of the Dow returned 10.8% average annual total returns, matching the Dow 30 and beating the S&P 500 Index, which returned 9.6%.The Dogs of the Dow website states since 2000, the strategy has had an average total return of ~9.9% when dividends are reinvested. This return is better than the average annual returns of ~8.7% for the Dow 30 during the same period. In addition, the S&P 500 Index has returned ~7.9% in the same stretch. Notably, this period includes the dot-com bust, the Great Recession caused by the sub-prime mortgage crisis, the bear market during the early stages of the COVID-19 pandemic, and the 2022 bear market.Another analysis of returns from 2008 to 2018 indicates the strategy generally works. For example, in 2008, the Dogs of the Dow would have underperformed the DJIA. However, it would have outperformed the DJIA in eight out of ten years.Another article indicates the Dogs of the Dow beat the DJIA by more than 1% annually on average in the decade through 2019. The Dogs of the Dow only trailed the broader index in three out of 10 years.However, the Dogs of the Dow strategy underperforms for some periods. For example, the annualized return was about 9.2% compared to approximately 16.0% for the S&P 500 Index in the decade through 2021.
A Brief History of the Dow 30
The Dow Jones Industrial Average (DJIA) is also called the Dow 30; both names are used synonymously. The Dow Jones 30 is an index of 30 blue-chip stocks created by Wall Street Journal editor Charles Dow in 1896.The index was created to track the market performance of leading industrial stocks in an era when the availability of information was limited. Initially, there were 12 industrial companies in the index.In 1916, the number of stocks in the index increased to 20. In 1928, the index was again expanded to 30 stocks, which has been at that number since then. Although the index was initially comprised of industrial stocks, the index later added non-industrial or service stocks. Today, the Technology, Financials, and Healthcare sectors have a significant representation in the Dow 30.
Dow Divisor
The DJIA is price-weighted, unlike most other indices weighted by market capitalization. This fact means equities with higher share prices are given greater weight in the index. It is calculated as the sum of the stock prices of all 30 companies divided by a factor known as the Dow Divisor. The Dow Divisor is adjusted for stock splits, dividends, spin-offs, and additions or deletions to the Dow 30. The Wall Street Journal calculates the Dow Divisor. The Dow Divisor formula attempts to maintain continuity, and it has been as high as 16.67 in 1928 and as low as 0.147 in 2019. The value of the Dow Divisor is 0.16268413125742.
How Are the Dow 30 Selected?
Today, the Dow Jones Industrial Average companies are chosen by a committee. The S&P Dow Jones Indices maintains the index, which is majority-owned by S&P Global (SPGI). The index does not include Transportations and Utilities, which have their own indices. The stock selection criteria are only partially transparent. Reportedly, to be considered for the Dow 30, a company must meet the following requirements:
The last time the Dow Jones Industrial Average was changed was in 2024 when Walgreens Boots Alliance (WBA), Intel (INTC), and Dow (DOW) were removed, and Amazoninc.com (AMZN), Nvidia (NVDA), and Sherwin-Williams (SHW) were added.
Stocks in the Dow 30
The current stocks in the Dow 30 are listed in the table below. The 2025 Dogs of the Dow are picked from this list at the end of each calendar year.At the start of 2025, three stocks do not pay dividends and thus cannot be included in the Dogs of the Dow. Salesforce (CRM) has never paid a dividend. In addition, Boeing (BA) suspended its dividends because of challenges during the COVID-19 pandemic and the Boeing 737-900 Max. Amazon does not pay a dividend.
The Dow 30
The 30 stocks in the Dow Jones Industrial Averages (DJIA)
The Bottom Line About the Dogs of the Dow 2025
Why does the Dogs of the Dow strategy seemingly work? First, the dividend yields are relatively high, leading to an initial advantage compared to stocks with lower dividend yields. Second, a stock often has a high dividend yield because the share price has fallen. This occurs either due to sector or company-specific difficulties. Usually, a stock on the Dogs of the Dow list is undervalued compared to the broader market. It follows a strategy of investing in temporarily undervalued stocks. Ultimately, the Dogs of the Dow is a contrarian strategy.More By This Author:3 Dividend Stocks For 2025
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