Quoted from The Wall Street Journal:
Contrarian investment strategy outpaced the Dow Jones Industrial Average for the first time since 2018
Investors’ Best Friend in 2022: The Dogs of the Dow
Jan. 5, 2023 8:00 am ET
The Dogs of the Dow broke away from the pack in 2022.
The popular contrarian investment strategy outpaced the Dow Jones Industrial Average last year for the first time since 2018, while investors sought havens during the wild ride in markets.
The Dogs strategy involves buying the 10 stocks with the highest dividend yields of the 30 Dow components at the beginning of a year and holding them over the next 12 months. The group of stocks is rebalanced at the end of every year to maintain an investment in the top 10 dividend payers. That gives investors the benefit of high dividend yields—which is typically a function of low stock prices.
Propelled by double-digit gains in shares of Chevron Corp., Amgen Inc. AMGN -0.36%decrease; red down pointing triangle and others, the 2022 Dogs rose 2.2%, including dividends, while the blue-chip index as a whole fell 6.9%.
The trade was one of the few winners in a year marked by red-hot inflation, higher interest rates and worries about a potential recession. The Dow, along with the broader S&P 500 and Nasdaq Composite indexes, suffered its worst year since 2008.
“Yield last year was king,” said Dan Genter, chief executive of Genter Capital Management. “It’s an old dog, not a new trick.”
As the Federal Reserve raised interest rates, investors generally abandoned the flashy technology stocks that propelled the stock market’s monster run of the previous decade.