Updated on May 24th, 2022 by Bob Ciura
The “Dogs of the Dow” investing strategy is a very simple way for investors to achieve diversification and income in their portfolios while remaining in the sphere of more conservative blue chip stocks.
The strategy consists of investing in the 10 highest yielding stocks in the Dow Jones Industrial Average, an index of 30 large cap U.S. stocks.
Large-cap stocks represent businesses with market caps above $10 billion. There are hundreds of large-cap stocks to choose from. With this in mind, we have compiled a list of over 400 large-cap stocks in the S&P 500 Index, with market caps of $10 billion or more.
You can download your free copy of the large-cap stocks list, along with relevant financial metrics like price-to-earnings ratios, dividend yields, and payout ratios, by clicking on the link below:
The “Dogs of the Dow” strategy produces above average income and concentrates on stocks that typically trade at lower valuations relative to the rest of the DJIA. Given that the DJIA represents some of the largest companies in the world, its “dogs” are typically companies with strong track records that have hit temporary problems.
For value investors looking to purchase good businesses that are currently out of favor, this is a great and simple strategy.
To implement this strategy, simply take the amount of money you have to invest and then divide it equally among the 10 highest yielding stocks in the DJIA. Hold these stocks for a whole year and then at the end of 12 months, look at the 30 Dow stocks again and resort them by dividend yield from highest to lowest.
Rebalance and reallocate your capital accordingly and repeat the process. In addition to the simplicity and focus on quality, value, and income that this strategy generates, it also improves discipline by preventing excessive emotion-driven trading.
It also encourages investors to reap the tax benefits from holding positions for at least one year before selling, thereby being taxed at the long-term capital gains tax rate instead of the short-term rate.
The 2022 Dogs of the Dow
The list of the 2022 Dogs of the Dow is below, along with the current dividend yield of the top-ten yielding DJIA stocks. Click on a company’s name to jump directly to analysis on that company.
- Dog of the Dow #10: Amgen Inc. (AMGN)
- Dog of the Dow #9: JPMorgan Chase (JPM)
- Dog of the Dow #8: Chevron Corp. (CVX)
- Dog of the Dow #7: Cisco Systems (CSCO)
- Dog of the Dow #6: Intel Corporation (INTC)
- Dog of the Dow #5: 3M Company (MMM)
- Dog of the Dow #4: Dow, Inc (DOW)
- Dog of the Dow #3: Walgreens Boots Alliance (WBA)
- Dog of the Dow #2: International Business Machines (IBM)
- Dog of the Dow #1: Verizon Communications (VZ)
- Final Thoughts
Dog of the Dow #10: Amgen Inc. (AMGN)
- Dividend Yield: 2.9%
Amgen is the largest independent biotech company in the world. Amgen discovers, develops, manufactures and sells medicines that treat serious illnesses. The company focuses on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology, and inflammation. Amgen generates about $26 billion in annual revenues.
On December 3rd, 2022, Amgen announced a 10.2% quarterly dividend increase to $1.94. On April 27th, 2022, Amgen announced first quarter results. Revenue increased 5.1% to $6.2 billion, beating estimates by $90 million. Adjusted net income of $2.3 billion, or $4.25 per share, compared favorably to adjusted net income of $2.15 billion, or $3.70 per share, in the previous year. Adjusted earnings-per-share was $0.12 higher than expected.
Product revenue increased 2% on higher volume for key products.
Source: Investor Presentation
Sales for Enbrel, which treats rheumatoid arthritis and remains Amgen’s top grossing product, decreased 7%, extending the year-over-year declines to eight consecutive quarters. The company expects net selling price to continue to decline as the product faces competition.
Prolia, which treats osteoporosis and should become the top grossing product sometime this year, grew 12% due to 10% volume growth and higher average prices. Osteoporosis diagnoses in the U.S. are now nearly back to pre-COVID-19 levels, a slight sequential improvement.
Amgen repurchased 24.6 million shares at an average price of $256 during the quarter. The company ended the quarter with $6.5 billion of cash and cash equivalents. Finally, Amgen provided guidance for 2022 as well. The company expects $17.00 to $18.00 per share in 2022.
Click here to download our most recent Sure Analysis report on Amgen (preview of page 1 of 3 shown below):
Dog of the Dow #9: JPMorgan Chase (JPM)
- Dividend Yield: 3.1%
JPMorgan was founded in 1799 as one of the first commercial banks in the U.S. Since then, it has merged or acquired more than 1,200 different institutions, creating a global banking behemoth with about $124 billion in annual revenue. JPMorgan competes in every major segment of financial services, including consumer banking, commercial banking, home lending, credit cards, asset management and investment banking.
JPMorgan Chase reported first quarter earnings on April 13th, 2022, and results were somewhat mixed, with revenue coming in ahead of expectations, while earnings missed the mark.
Source: Investor Presentation
Earnings-per-share came to $2.63 in Q1, which was seven cents less than expected. In addition, earnings declined from $3.33 in Q4 of 2021, and from $4.50 in Q1 of 2021. Total revenue was down 5% year-over-year to $30.7 billion, but did beat expectations by $170 million. Provisions for credit losses were $1.46 billion, versus a benefit of $1.29 billion in Q4, and a benefit of $4.16 billion in the year-ago period.
Total loans ended the period at $1.07 trillion, essentially flat with the prior quarter. Total deposits were $2.56 trillion, up from $2.46 trillion as the company continues to take deposits without lending them. We see the loan-to-deposit ratio near 40% as a clear sign of management’s caution into the next few quarters.
Management approved a new buyback authorization of $30 billion, starting on May 1st, 2022. At the current share price, such a buyback would retire about 8% of the company’s outstanding shares.
Click here to download our most recent Sure Analysis report on JPM (preview of page 1 of 3 shown below):
Dog of the Dow #8: Chevron Corporation (CVX)
- Dividend Yield: 3.2%
Chevron is the third–largest oil major in the world. In 2021, Chevron generated 84% of its earnings from its upstream segment.
The company has increased its dividend for over 40 consecutive years.
Source: Investor Presentation
In late April, Chevron reported (4/29/22) financial results for the first quarter of fiscal 2022. It cut its production by -2% over last year’s quarter but greatly benefited from the rally of oil and gas prices to 13-year highs, which resulted from the sanctions of western countries on Russia for its invasion in Ukraine. As a result, the oil major grew its adjusted earnings-per-share 31% sequentially, from $2.56 to $3.36, a nearly all-time high.
As we do not expect sanctions to be withdrawn anytime soon, we expect oil and gas prices to remain excessive this year and thus we have raised our forecast for the annual earnings-per-share of Chevron from $9.90 (our forecast before the war) to $16.40.
Click here to download our most recent Sure Analysis report on CVX (preview of page 1 of 3 shown below):
Dog of the Dow #7: Cisco Systems (CSCO)
- Dividend Yield: 3.4%
Cisco Systems is the global leader in high performance computer networking systems. The company’s routers and switches allow networks around the world to connect to each other through the internet. Cisco also offers data center, cloud, and security products.Cisco and generates about $51 billion in annual revenues. On February 16th, 2022, Cisco announced a 2.7% dividend increase in the quarterly payment to $0.38 per share.
On May 18th, 2022, Cisco reported earnings results for the third quarter of fiscal year 2022. Revenue grew 0.3% to $12.8 billion. Adjusted earnings-per-share of $0.87 compared grew 4.8%.
Source: Investor Presentation
Secure Agile Networks, formerly known as Infrastructure, grew 4% while End-to-End Security, formerly known as Security, improved by 7%. Internet for the Future was up 6% and Optimized Application Experiences was higher 8%. Collaboration was once again the lone segment to decline, as revenue decreased 7%.
By region, the Americas grew 5% while Europe/Middle East/Africa and Asia-Pacific/Japan/China were both lower by 6%. Total gross margins contracted 60 basis points to 63.3%. Deferred revenue grew 7% to $22.3 billion. Cisco repurchased 5 million shares at an average price of $54.20 during the quarter. The company remaining share repurchase authorization is $17.6 billion, or nearly 10% of the current market cap.
Cisco offered a revised outlook for fiscal year 2022 as well, with the company now expecting revenue growth of 2% to 3%, down from 5.5% to 6.5% and 5% to 7% previously. Adjusted earnings-per-share is now expected in a range of $3.29 to $3.37, compared to $3.41 to $3.46 and $3.38 to $3.45 previously. At the midpoint, this would be a 3.4% improvement from the prior year.
Click here to download our most recent Sure Analysis report on Cisco (preview of page 1 of 3 shown below):
Dog of the Dow #6: Intel Corporation (INTC)
- Dividend Yield: 3.4%
Intel is the largest manufacturer of microprocessors for personal computers, shipping about 85% of the world’s microprocessors. Intel also manufactures products like servers and storage devices that are used in cloud computing. Intel generates about $75 billion in annual sales.
On January 26th, 2022, Intel increased its dividend 5% to $0.365 for the March 1st, 2022 payment date. On April 28th, 2022, Intel reported first quarter results. Revenue fell 6.6% to $18.4 billion, but was $80 million above estimates. On an adjusted basis, revenue fell just 1%. Adjusted earnings-per-share of $0.87 compared to $1.34 in the prior year, but was $0.08 better than expected.
Revenue for the PC-Centric business decreased 13% to $9.3 billion for the quarter, primarily due to component shortages as well as the modem ramp down. PC volume fell 18%.
Datacenter and AI Group continues to act well, with revenue growing 22% to $6.0 billion. Enterprise and government revenue was higher by 53% and unit volumes grew 17%. Network and Edge Group grew 23% to $2.2 billion due to the ongoing recovery from COVID-19 and strong networking demand.
Intel saw strong growth rates in its emerging segments. Intel Foundry Services, Accelerated Computing Systems and Graphics Group, and Mobileye grew 175%, 21%, and 5%, respectively. Gross margin declined 480 basis points to 50.4%.
Click here to download our most recent Sure Analysis report on Intel (preview of page 1 of 3 shown below):
Dog of the Dow #5: 3M Company (MMM)
- Dividend Yield: 4.1%
3M sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has about 95,000 employees and serves customers in more than 200 countries.
Source: Investor Presentation
3M is now composed of four separate divisions. The Safety & Industrial division produces tapes, abrasives, adhesives and supply chain management software as well as manufactures personal protective gear and security products.
The Healthcare segment supplies medical and surgical products as well as drug delivery systems. Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources while reducing costs. The Consumer division sells office supplies, home improvement products, protective materials and stationary supplies.
On April 26th, 2022, 3M reported first quarter earnings results for the period ending March 31st, 2022. Revenue fell 0.3% to $8.8 billion, but was $50 million better than expected. Adjusted earnings-per-share of $2.65 compared to $2.77 in the prior year, but was $0.34 above estimates. Organic growth for the quarter was 2%.
Safety & Industrial grew 0.5% due to strength in industrial adhesives and tapes, abrasives, and masking systems, though personal safety declined. Transportation & Electronics decreased by 0.3%. Commercial solutions growth was offset by a decline in transportation and safety. Health Care grew 4.7%. Consumer was higher by 3.4% as demand for home care, stationery and office and home improvement products continues to be strong.
3M provided an updated outlook for 2022, with the company now expecting adjusted earnings-per-share of $10.75 to $11.25.
Click here to download our most recent Sure Analysis report on 3M (preview of page 1 of 3 shown below):
Dog of the Dow #4: Dow Inc. (DOW)
- Dividend Yield: 4.2%
Dow Inc. is a standalone company that was spun off from its former parent, DowDuPont. That company has broken into three publicly traded, standalone parts, with the former Materials Science business becoming the new Dow Inc. Dow should produce about $60 billion in revenue this year.
Dow reported first quarter earnings on April 21st, 2022, and results were much better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $2.34, which was 29 cents ahead of estimates. Revenue soared 29% to $15.3 billion, beating expectations by nearly $800 million. The company said they continue to see strong end market demand across its businesses.
The company announced a new $3 billion share repurchase program, which is in addition to the $775 million that was still outstanding from the old one. At the current price, that’s good for over 7% of the market cap.
Revenue growth was due to gains in all operating segments, businesses, and regions.
Source: Investor Presentation
Local price increased 28%, making up the entirety of the revenue gain. Volume was up 3% year-over-year. Earnings were driven by higher revenue, as well as lower planned maintenance activity, which more than offset higher raw material and energy costs.
Operating cash was $1.6 billion, and free cash flow was $1.3 billion. Dow returned $1.1 billion to shareholders in Q1, with dividends and buybacks split roughly equally. We now see $8.30 in earnings-per-share following a blockbuster Q1.
The company’s product portfolio is not only its competitive advantage, but also should perform well enough during downturns to keep the company profitable. We see the company’s focused efforts on high-growth areas such as consumer care, packaging, and infrastructure, as well as its very long operating history as a component of the former company, and its brand, as competitive advantages.
Click here to download our most recent Sure Analysis report on Dow (preview of page 1 of 3 shown below):
Dog of the Dow #3: Walgreens Boots Alliance (WBA)
- Dividend Yield: 4.5%
Walgreens Boots Alliance is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures, the company employs more than 325,000 people and has more than 13,000 stores.
On March 31st, 2022, Walgreens reported Q2 results for the period ending February 28th, 2021. Sales from continuing operations grew 3% over the prior year’s quarter, driven by COVID-19 vaccinations and testing. U.S. retail comparable sales grew 15%, which is a 20-year high growth rate. Adjusted earnings-per-share grew 26%, from $1.26 to $1.59, and exceeded analysts’ consensus by $0.19. The company has beaten analysts’ estimates for 7 consecutive quarters.
Walgreens reiterated its guidance for low-single digit growth of its annual earnings-per-share.
Click here to download our most recent Sure Analysis report on Walgreens (preview of page 1 of 3 shown below):
Dog of the Dow #2: International Business Machines (IBM)
- Dividend Yield: 4.9%
IBM is a global information technology company that provides integrated enterprise solutions for software, hardware, and services. IBM’s focus is running mission critical systems for large, multi-national customers and governments. IBM typically provides end-to-end solutions.
The company now has four business segments: Software, Consulting, Infrastructure, and Financing. IBM had annual revenue of ~$57.4B in 2021 (not including Kyndryl).
IBM reported stellar results for Q1 2022 on April 19th, 2021. Company-wide revenue increased 8% to $14,197M from $13,187M while diluted adjusted earnings per share rose 25% to $1.40 from $1.12 on a year-over-year basis. Diluted GAAP earnings per share rose 62% to $0.73 in the quarter from $0.45 in the prior year.
Revenue for Software increased 12.3% to $5,772M from $5,138M in comparable quarters due to 7% growth in Hybrid Platform & Solutions and a 26% increase in Transaction Processing. Revenue was up 18% for RedHat, 3% for Automation, 2% for Data & AI, and 5% for Security. Consulting revenue increased 13.3% to $4,829M from $4,262M due to 15% rise in Business Transformation, 14% growth in Technology Consulting, and 10% growth in Application Operations.
The book-to-bill ratio is a healthy 1.1X. Revenue for Infrastructure was down 2.3% at $3,219M from $3,293M due to declines in Z (-19%) offset by 5% growth in Distributed Infrastructure, and flat in Infrastructure Support.
Click here to download our most recent Sure Analysis report on IBM (preview of page 1 of 3 shown below):
Dog of the Dow #1: Verizon Communications (VZ)
- Dividend Yield: 5.0%
Verizon Communications was created by a merger between Bell Atlantic Corp and GTE Corp in June 2000. Verizon is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S. Verizon has now launched 5G Ultra-Wideband in several cities as it continues its rollout of 5G service.
On April 22nd, 2022, Verizon announced first quarter earnings for the period ending March 31st, 2022. Revenue grew 2.1% to $33.6 billion, in-line with expectations. Adjusted earnings-per-share of $1.35 compared favorably to $1.31 in the prior year and was also in-line with estimates.
The company had a net loss of 36,000 wireless postpaid phone during the quarter, but wireless revenue grew 9.5% to $18.3 billion. This is the ninth consecutive year that the company has lost postpaid phone subscribers, but this was the smallest loss in that time. Total retail connections of 143 million was the best figure for the first quarter since 2018.
You can see highlights of the company’s first-quarter performance in the image below:
Source: Investor Presentation
We expect annual returns of 15.3% for Verizon stock, comprised of 4% earnings growth, the 5.2% dividend yield, and a sizable boost from an expanding P/E multiple.
Click here to download our most recent Sure Analysis report on Verizon (preview of page 1 of 3 shown below):
Given the descriptions above, the Dogs of the Dow are clearly a very diverse group of blue-chip stocks which each enjoy significant competitive advantages and lengthy histories of paying rising dividends.
As a result, this investing strategy is a great, low-risk way for unsophisticated investors to approach dividend growth investing.
While it may not outperform the broader market every year, it is virtually guaranteed to provide investors with a combination of attractive current yield with steadily rising income over time.
Other Dividend Lists
Value investing is a valuable process to combine with dividend investing. The following lists contain many more high-quality dividend stocks:
- The Dividend Aristocrats List is comprised of 65 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 38 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.