11 Best Dogs of the Dow Stocks Ranked By Hedge Fund Sentiment

In this article, we discuss 11 best Dogs of the Dow ranked by hedge fund sentiment.

The Dogs of the Dow strategy is an investment approach that involves selecting and investing in the top 10 dividend-yielding stocks from the Dow Jones Industrial Average (DJIA) on an annual basis. The strategy assumes that these high-yield stocks, or “Dogs,” are temporarily undervalued or out of favor, and by investing in them, investors can benefit from potential price appreciation while receiving a steady income from dividends. Many financial experts have explained the strategy thoroughly to help investors gain a deep understanding of it. Robert R. Johnson, professor of finance at the Heider College of Business at Creighton University, spoke about the Dogs in one of his interviews with Business Insider. Here are some comments from the analyst:

“The underlying premise behind the strategy is mean reversion. The [Dogs of the Dow] is based on the theory that stocks can be over or undervalued, but over the long run those that are undervalued will ‘revert to the mean.”

Over time, the Dogs of the Dow strategy has been a good way for investors to make money, especially during slow economic growth. Various reports have pointed out the strong performance of this strategy over time, which has increased investors’ trust in it. In one of our articles on the topic, we referred to the Wall Street Journal’s report which said that the strategy returned 34.3% in 2013 through December 26, outperforming the Dow, which gained 28.9% during that time. The report also noted that this strategy outperformed the market for a significant part of the 1970s and 1980s. Over the long term, the strategy has also done better than its standard benchmark. According to Forbes, from 1957 to 2003, the Dogs outperformed the broader index by 3%.

On average, since 2010, the Dogs of the Dow have shown returns that are very similar to the broader market index. Robert R. Johnson has commented on the recent performance of the strategy.

“While they have produced similar returns over that 12-year period, some individual years have seen quite a divergence in performance. In 2020, for example, the DJIA gained 7.2% while the Dogs suffered a loss of 12.7%. The Dogs also underperformed in 2021, when the Dogs generated a return of 16.3% versus 20.8% for the DJIA.”

The report also compared the Dogs’ returns with that of the S&P 500. The report revealed that the Dogs had an average annual return of 13.6%, while the S&P 500 had 13.9% per year, generating nearly similar returns during this period. Some of the best stocks from the category include JPMorgan Chase & Co. (NYSE:JPM), Chevron Corporation (NYSE:CVX), and Intel Corporation (NASDAQ:INTC) as these stocks have high yields. In this article, we will discuss the best Dogs of the Dow according to hedge funds.

Photo by Karolina Grabowska from Pexels

Our Methodology:

11. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)

Number of Hedge Fund Holders: 34

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is a multinational retail pharmacy and healthcare company. The company also offers a range of health and wellness services, including flu shots, immunizations, health screenings, and consultation services with pharmacists.

In fiscal Q4 2023, Walgreens Boots Alliance, Inc. reported revenue of $25.2 billion, which showed a 9.2% growth from the same period last year. The company’s cash generation also remained strong as it generated $1 billion in operating cash flow and its free cash flow amounted to over $549 million.

Walgreens Boots Alliance, Inc. currently pays a quarterly dividend of $0.48 per share. The company has raised its dividends for 47 years in a row. With a dividend yield of 8.98% as of October 25, WBA is one of the best dogs of the Dow on our list.

At the end of Q2 2023, 34 hedge funds in Insider Monkey’s database reported having stakes in Walgreens Boots Alliance, Inc., compared with 39 in the previous quarter. The collective value of these stakes is over $440.8 million.

10. Dow Inc. (NYSE:DOW)

Number of Hedge Fund Holders: 37

Dow Inc. (NYSE:DOW) is an American multinational chemical corporation that operates in various segments of the chemicals and materials industry. The company recently announced its Q3 earnings and reported revenue of $10.7 billion, which beat analysts’ consensus by $320 million. Its operating cash flow for the quarter came in at $1.7 billion and it also returned $492 million to shareholders through dividends.

Dow Inc. has been paying regular dividends to shareholders since 1912. The company offers a quarterly dividend of $0.70 per share and has a dividend yield of 5.69%, as recorded on October 22.

As of the end of Q2 2023, 37 hedge funds in Insider Monkey’s database reported having stakes in Dow Inc., down from 45 a quarter earlier. The total value of these stakes is over $1.05 billion.

9. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 49

3M Company (NYSE:MMM) is a Minnesota-based diversified conglomerate with a wide range of products and services. The company operates in several business segments and is known for its innovation in various industries.

In its recently announced Q3 earnings, 3M Company posted revenue of $8.3 billion, surpassing analysts’ consensus by $280 million. The company’s operating cash flow of $1.9 billion showed a 25% growth on a year-over-year basis. It also returned $828 million to shareholders through dividends during the quarter.

3M Company, one of the best dogs of the Dow, currently pays a quarterly dividend of $1.50 per share. The company is a dividend king with 65 consecutive years of dividend growth under its belt. The stock’s dividend yield on October 25 came in at 6.66%.

At the end of June 2023, 49 hedge funds owned stakes in 3M Company, compared with 51 in the previous quarter, as per Insider Monkey’s database. The consolidated worth of these stakes is over $726.7 million. The largest stakeholder of the company in Q2 was AQR Capital Management.

8. International Business Machines Corporation (NYSE:IBM)

Number of Hedge Fund Holders: 51

International Business Machines Corporation (NYSE:IBM) is a multinational technology company with a long history and a diverse range of products and services. The company offers a quarterly dividend of $1.66 per share and has a dividend yield of 4.82%, as of October 25. Its dividend growth streak currently stands at 28 years.

In the first six months of 2023, International Business Machines Corporation’s cash generated remained strong. The company’s operating cash flow for the period came in at $64 billion and its free cash flow stood at $3.4 billion.

At the end of Q2 2023, 51 hedge funds tracked by Insider Monkey reported owning stakes in International Business Machines Corporation, up from 49 in the preceding quarter. The consolidated value of these stakes is nearly $814 million.

7. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 53

Verizon Communications Inc. (NYSE:VZ) is one of the largest telecommunications companies in the US, providing a wide range of telecommunications and technology services to consumers, businesses, and government entities.

In the third quarter of 2023, Verizon Communications Inc. reported revenue of $33.3 billion, which fell by 2.6% from the same period last year. Yera-to-date its operating cash flow came in at $28.8 billion and free cash flow was $14.6 billion, up from $28.2 billion and $12.4 billion from the same period last year, respectively.

Verizon Communications Inc. has been raising its dividends consistently for the past 17 years. The company offers a quarterly dividend of $0.665 per share and has a dividend yield of 7.76%, as of October 25.

As of the end of Q2 2023, 53 hedge funds in Insider Monkey’s database held stakes in Verizon Communications Inc., compared with 59 in the previous quarter. The total value of these stakes is roughly $829 million. With over 6.7 million shares, Diamond Hill Capital was the company’s leading stakeholder in Q2.

5. Amgen Inc. (NASDAQ:AMGN)

Number of Hedge Fund Holders: 57

Amgen Inc. (NASDAQ:AMGN) is an American biotech company that focuses on the discovery, development, and commercialization of innovative therapies to treat serious and life-threatening diseases. On October 24, the company declared a quarterly dividend of $2.13 per share, which was consistent with its previous dividend. The company has been growing its dividends consistently since 2011, which makes it one of the best dogs of the dow on our list. The stock has a dividend yield of 3.09%, as of October 25.

In the second quarter of 2023, Amgen Inc. posted revenue of $6.98 billion, up 6% from the same period last year. Its operating cash flow for the quarter jumped to $3.8 billion, from $1.7 billion in the prior year period. The company returned $1.1 billion to shareholders in dividends.

Amgen Inc. was a part of 57 hedge fund portfolios, as per Insider Monkey’s database of Q2 2023. The collective worth of the stakes owned by these hedge funds is more than $1.56 billion. The leading stakeholder of the company in Q2 was Two Sigma Advisors.

4. The Goldman Sachs Group, Inc. (NYSE:GS)

Number of Hedge Fund Holders: 70

The Goldman Sachs Group, Inc. (NYSE:GS) is a multinational investment banking and financial services company. It currently pays a quarterly dividend of $2.75 per share, growing it by 10% in July this year, after passing the Federal Reserve’s stress test. The stock has a dividend yield of 3.68%, as of October 25.

With a collective stake value of over $3.1 billion, 70 hedge funds in Insider Monkey’s database owned positions in The Goldman Sachs Group, Inc. in Q2 2023. In the previous quarter, 69 hedge funds held stakes in the company. With over 2.8 million shares, Eagle Capital Management was the company’s leading stakeholder in Q2.

3. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 73

An American energy company, Chevron Corporation is next on our list of the best dogs of the Dow stocks. The company’s quarterly dividend currently stands at $1.51 per share and has a dividend yield of 3.86%, as of October 25. It has been rewarding shareholders with growing dividends for the past 36 consecutive years.

Of the 910 hedge funds in Q2 2023, 73 funds owned stakes in Chevron Corporation, up significantly from 64 in the previous quarter, according to Insider Monkey’s database. Their collective stake value is over $21.4 billion.

2. Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 78

Merck & Co., Inc. is a New Jersey-based multinational pharmaceutical and healthcare company that operates in various aspects of the healthcare industry. The company currently pays a quarterly dividend of $0.73 per share and has been growing its dividends consistently for the past 11 years. As of October 25, the stock has a dividend yield of 2.83%.

At the end of Q2 2023, 78 hedge funds in Insider Monkey’s database reported having stakes in Merck & Co., Inc., up from 75 in the previous quarter. These stakes have a total value of over $2.65 billion.

1. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 106

JPMorgan Chase & Co. tops our list of the best dogs of the Dow stocks. On September 19, the company declared a 5% growth in its quarterly dividend to $1.05 per share, following the successful completion of the Federal Reserve’s 2023 Comprehensive Capital Analysis and Review stress test. The stock’s dividend yield on October 25 came in at 2.98%.

As per Insider Monkey’s database of Q2 2023, 106 hedge funds owned stakes in JPMorgan Chase & Co., compared with 112 in the preceding quarter. The collective worth of these stakes is over $4.38 billion.

You can also take a look at 10 Best Dialysis and Kidney Disease Stocks to Buy and Dividend Capture Strategy: 10 High Yield Stocks To Buy in November

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This article is originally published at Insider Monkey.