The Dogs of the Dow is a well-known investment strategy first published in 1991 by Michael Higgins. It seeks to maximize the yield of investments by buying the 10 highest-paying dividend stocks available from the Dow Jones industrial average each year. The highest-yielding stocks are also the lowest-priced stocks in the venerable index, as the lower a stock (or bond) goes in price, the higher the attached yield or coupon becomes.
We decided to see how this year’s group is fairing, as we have crossed the halfway point for 2023. While the Dogs of the Dow have changed since the start of the year, they also have become a great contrarian idea in a market that is very overbought in an economy that could really be suffering six months from now. With the Nasdaq up over 36% and the S&P 500 up close to 18%, investors trying to play catch-up on the big tech giants that have been driving the market rally may get hurt trying to pick up nickels in front of a bulldozer, as the lion’s share of the big short-term money likely has already been made.
Here are the current five highest-yielding Dogs of the Dow listed in order of the highest yield. While all are rated Buy across Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Verizon
This top telecommunications stock offers tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.
Verizon’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.
The company also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
Verizon and the other big telecom giants have been mauled this week over concerns over lead phone lines. While this could keep a lid on the stock in the near term, many feel it is the best buying opportunity in years.
Investors receive a 7.67% dividend. Oppenheimer has a $46 price objective on the shares, while the consensus target is $43.48. Verizon Communications stock closed Tuesday’s trading session at $32.27, which was up close to 3% for the day.
Walgreens
This huge drugstore chain operator is a safe retail play for investors looking to add health care now, and it trades at a cheap 7.5 times 2023 earnings expectations. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.
The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.
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