How the Dogs of the Dow Did in January: Hewlett-Packard Company (HPQ), Verizon Communications Inc. (VZ) and More

Page 1 of 2

Investors have never been hungrier for income, and that hunger has led to renewed interest in investing strategies that focus on maximizing income. One simple strategy involves choosing the 10 highest-yielding stocks in the Dow Jones Industrial Average , known as the Dogs of the Dow. The Dogs have gotten a lot more attention lately as investors look to outperform the overall market while producing above-average levels of income from their portfolios.

One month into 2013, the Dogs of the Dow have a slight edge over the Dow’s overall performance. Obviously, it’s far too early for the Dogs to declare victory, but the trends that we’ve seen within the group could shed some light on what’s to come for the Dow Dog stocks during the rest of 2013 and beyond.

Hewlett-Packard Company (NYSE:HPQ)How January went to the Dogs
Looking at raw numbers, the Dogs of the Dow just barely beat out the broader index with a return of 6.1% versus the Dow’s 5.8% return. However, neither figure includes the dividends the Dow’s component stocks paid during the month, and because the Dogs had a sizable yield advantage at the beginning of the year, the actual gap between the two strategies was likely somewhat wider than the raw price data shows.

Much of the Dogs’ success owes to their inclusion of the Dow’s top performer, Hewlett-Packard Company (NYSE:HPQ) , within their ranks. HP rose 16% as the beleaguered tech company managed a modest rebound from its huge losses of 2012. At this point, HP hasn’t had a chance to fully demonstrate a substantive turnaround for its businesses as unfavorable trends in the PC industry continue to plague the company and its rivals. But the bounce is long overdue and highlights one of the value-based elements of the Dogs of the Dow strategy: It often selects beaten-down stocks because low stock prices tend to boost dividend yields.

Several other Dogs were among the Dow’s big winners in January. Pfizer Inc. (NYSE:PFE) rose 9% as it continued to show signs of strength despite having to recover from severe revenue losses owing to the expiration of patent protection on blockbuster drug Lipitor. Yet a promising pipeline of drugs and strategic moves designed to unlock shareholder value, including the initial public offering of its Zoetis animal health unit, have given shareholders more confidence that Pfizer will survive its plunge off the patent cliff and create new sources of revenue growth well into the future.

Another turnaround candidate, McDonald’s Corporation (NYSE:MCD) , gained 8% during the month. As recently as November, McDonald’s had investors extremely worried that the fast-food giant’s growth spurt was finally coming to an end, as the company reported its first drop in monthly same-store sales in nine years. Yet even though competition between McDonald’s and its peers has ramped up both within the U.S. and in high-growth international markets like China, McDonald’s has recognized some of its mistakes and has moved back toward some of its more successful past strategies, including emphasizing the company’s value proposition to customers.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!