The Dow Jones 30 refers to an index of 30 blue-chip stocks created by Wall Street Journal editor Charles Dow in 1896. They earned $42.4 billion which is 34% more than the $31.6 billion they made during the same time last year. Cash from operations, net interest income, and net income have all increased above pre-pandemic levels now. I believe this will continue to trend upwards as JPM is also positioned to benefit from higher interest rates.

The range of dividends the Dogs of the Dow paid in 2020 was 0.61% to 6.05%. With just one trading day left in 2022, the range is 0.71% to  6.65%. Here is a preliminary list of the Dogs of the Dow for 2023, based on a screen run after markets closed on December 29. We will update these numbers after markets close on Friday.

JPMorgan competes in every major segment of financial services, including consumer banking, commercial banking, home lending, credit cards, asset management, and investment banking. Cisco offered a revised outlook for the fiscal year 2023 as well, with the company now expecting revenue growth of 9% to 10.5%, compared to 4.5% to 6.5% and 4% to 6% previously. Adjusted earnings-per-share is now expected in a range of $3.73 to $3.49, compared to $3.51 to $3.58 and $3.49 to $3.56 previously. At the midpoint, this would be an 11.9% improvement from the prior year. Earnings-per-share totaled $3.32, but this was well off consensus estimates of $5.97 and below last year’s total of $10.81.

Of these ten Dow stocks, the five stocks with the lowest closing price are the 2022 Small Dogs of the Dow. For all steps required to invest in the 2022 Dogs of the Dow, get the free Dogs of the Dow Checklist. Large range of metrics and information about individual stocks.

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An investor who wants to practice the Dogs of the Dow strategy will find the 10 highest dividend-yielding stocks at the beginning of the calendar year. Many stock screening tools will provide investors with an updated list of the Dogs of the Dow. However, another advantage of investing in Dow stocks is that every one of the 30 Dow components pays a dividend. This allows investors to execute a simple strategy of selecting the top 10 highest-yielding stocks and putting an equal amount of money into each one. The most recent earnings report from Dow might give investors confidence that it is on the upswing, with the company beating the consensus earnings estimate. However, keep in mind, the total net income was off 55% from a year ago.

Dow (DOW, $50.07) is in the doghouse, and perhaps well it should be given declines and lumpiness in earnings. However, the company might be forgiven in as much as the chemicals business is cyclical. And if you are waiting for the chemical business to come back, getting paid vela martillo just over 6% is a tenable position for many investors. Of course, all these construction plans consume capital, hence the decline in Intel’s free cash flow seen in its second-quarter report. Numerically, it’s possible that capital expenditures will squeeze the dividend.

As with many other retailers, Walgreens is struggling with post-pandemic crosscurrents amid inflation, a perennially shifting healthcare landscape and jittery consumers. Business stalled after the company failed to receive attractive bids. In June, it announced its intention to retain the business. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. In 2021, the Dogs of the Dow strategy underperformed both the S&P 500 and DJI.

The 2023 Dogs of the Dow

These stocks are considered “dogs” or not desirable for investors. However, the investing strategy argues that these stocks can have significant gains in stock price plus relatively high dividend yields. This point is because the stock is thought to be temporarily oversold. To use this strategy, one starts by investing equal amounts into the 10 highest-dividend-yielding stocks from the Dow Jones Industrial Average. The idea is that by selecting from only the 30 stocks in the Dow, investors are already filtering to blue-chip companies.

While their PE ratio may be higher than peers, their quality justifies it, and a fair value estimate of $205 per share for 2024 suggests significant upside potential. Over the last decade, JPM’s PE (Price-Earning Ratio) sits above some of their peers because of the quality they offer. Using EPS (earning per share) estimates and using conservative growth estimates, we can calculate a fair value using a discounted cash flow model. The company had postpaid phone net additions of 217K during the quarter, much better than the 8,000 net additions in the third quarter.

As a result, a significant portion of any outperformance can be lost in capital gains taxes each year. Conversely, it is not uncommon for the Dogs that continue to lag to remain Dogs. So investors may not be able to offset capital gains by selling the losers and realizing those losses. There’s absolutely no guarantee the shares of the Dogs will bark again this year.

If you adhere to the Dogs of the Dow strategy, you may likely find you will be overturning your position in VZ come this time next year. The last time Verizon Communications (VZ, $38.55) was not among the top five Dogs of the Dow was in 2009. VZ has been in the doghouse so long, the reasonable investor might question whether it will ever get out. The telecom business is tricky, and every time Verizon zigs, telecom zags. The latest example was in 2021 when the company spent nearly $46 billion – more than any other major telecom company – on broadband licenses in anticipation of a 5G world that has yet to materialize. Net-net, it’s possible that IBM will spend another year in the doghouse.

From the bottom end of the old range, $9 billion, to the top of the new range is 30%, a big number, so it’s fair to assume management is feeling confident. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. This year’s crop of Dogs seems to face thornier problems than in years past. Of course, you and I know that high yields don’t mean a stock is a value—sometimes they just mean a stock is cheap. The Dogs strategy showed cracks in 2019, really fell off the rails in 2020 and came up short again in 2021. This is rooted in an “old-school” value approach that views big dividends as a sign that high-quality blue chips are undervalued.

Dogs of the Dow 2022 FAQ

And interestingly, we have eight dogs returning for another race this year. Only two of 222’s Dogs—Coca-Cola KO

(KO) and Merck (MRK)—cycled out, replaced by JPMorgan Chase JPM

(JPM) and 2021 Dog Cisco Systems CSCO

(CSCO).

These 10 stocks pay higher dividends because their shares were selling off or underperforming. Three Dow 30 stocks–Disney, Boeing, and Salesforce–don’t pay dividends. Disney and Boeing have suspended their dividends, while Salesforce has never paid one. Another reason why https://bigbostrade.com/ the DJIA is used for the Dogs of the Dow strategy is that every stock in the index pays a dividend. Many of the Dow components are considered dividend aristocrats. By definition, dividend aristocrats are required to meet certain market cap and liquidity requirements.

• And interestingly, we have eight dogs returning for another race this year.
• By contrast, both stocks new to the Dogs fared poorly in 2022.
• However, the Dogs of the Dow strategy underperform for some periods.
• The two changes were Merck (MRK) and Coca-Cola (KO) dropped off the list, and Cisco (CSCO) and JPMorgan Chase (JPM) were added to it.
• In 2021, the Dogs of the Dow strategy underperformed both the S&P 500 and DJI.
• The Dogs of the Dow strategy assumes blue-chip companies do not change their dividend to reflect the normal business cycle.

So how have the Dogs of the Dow performed over the long-term? We recommend that you sign up to receive our free Dogs of the Dow Newsletter. Doing so will keep you up to date with all that goes on here at Dogs of the Dow and alert you to high dividend paying stock opportunities as well as any official Dogs of the Dow revisions. As this illustrates, the Dogs of the Dow portfolio strategy can result in widely divergent results from year to year. Moreover, there are more consequences investors must consider before adopting this strategy, especially regarding taxes. In 2021, the Dogs beat the broader market posting a loss of 1.5% as opposed to a 6% loss for the DJIA.

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One should keep in mind with this investment strategy that the Dow stocks with the highest yields likely did not perform well in the past year are selected. 2020 has been an exceptional year and impacting the outperformance a lot as you can see in the table below. O’Higgins back-tested the strategy to the 1920s and found that the Dogs of the Dow outperformed the broader market. For instance, between 1992 and 2001, the Dogs of the Dow returned 10.8% average annual total returns matching the Dow 30 and beating the S&P 500 Index, which returned 9.6%. By region, the Americas grew 9%, Europe/Middle East/Africa increased by 5%, and Asia-Pacific/Japan/China was up by 1%. Cisco repurchased 26 million shares at an average price of $47.72 during the quarter.

However, waiting it out with a 5% yield, and the financial strength to maintain it, may prove to be alluring for many investors. We can’t retire off of 4.5% in annual yield—a “perfect” amount of portfolio income is closer to 7%. Even if we put a million bucks to work on the Dogs, we’d still only be netting $45,000 a year. But just like that, in a disastrous 2022, the Dogs stood up when just about everything—including the industrial average itself—fell down. The Dow Dogs, as mentioned, finished in the green on a total-return basis while the S&P 500 lost 18%.

JPM is a global financial services giant operating in various sectors, including Consumer & Community Banking, Corporate & Investment Banking, and Asset Wealth Management. As mentioned previously, JPM was classified as a Dog of the Dow simply due to macro conditions that made all of the financial sector face some headwinds. However, JPM has been crushing it by reporting increased cash flows in almost all categories of their business. As a result, this investing strategy is a great, low-risk way for unsophisticated investors to approach dividend growth investing.

It underperformed the S&P 500 in 2021 by 16 percentage points and so far this year, the Dogs are down less than the market at large. Verizon is the highest dividend yielding Dow stock at the close of 2022 with a dividend yield of 6.6%. The following table lists the ten highest yielding Dow stocks as of the close on December 30, 2022. Of these ten Dow stocks, the five stocks with the lowest closing price are the 2023 Small Dogs of the Dow.

Similarly, JPMorgan Chase (JPM 1.30%) shares suffered when a combination of rising interest rates and the tough market environment for investment banking dealt the financial giant a double whammy. The Dogs of the Dow website states since 2000, the strategy has had an average total return of ~8.7% when dividends are reinvested. This return is compared to the average annual returns of ~7.9% for the Dow 30 during the same period. In addition, the S&P 500 Index has returned ~7.6% in the same stretch. Notably, this period includes the dot-com bust, the Great Recession caused by the sub-prime mortgage crisis, the bear market during the early stages of the COVID-19 pandemic, and the 2022 bear market. This strong cash flow is also represented in the dividend stability of JPM.

On December 12th, 2022, Amgen announced a 9.8% quarterly dividend increase to $2.13. Management noted that it would target $12 billion in share repurchases this year, helping to drive our initial estimate of $12.00 in earnings-per-share for 2023. Total loans ended the period at $1.14 trillion, up from $1.11 trillion at the end of September. Total deposits were $2.34 trillion, down from $2.41 trillion in the prior quarter. We see the loan-to-deposit ratio near 49% as a sign of management’s caution in the next few quarters.

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. IBM returns as a Dog of 2023 despite rising 5.4% in 2022, due to its rich 4.7% dividend yield. And Amgen, following a nearly 17% rise in 2022, is a Dog for 2023 with a yield of 3.3%. While some of the stocks are the same, there are several new additions. It’s simply a list of the 10 stocks with the highest dividend yield at that moment in time. The Dogs of the Dow strategy has been around for decades but gained renewed interest among investors in 1991.

None of the credit downgrades even mentioned JPM by name but nonetheless effected the stock price when first announced. Being in the financial sector, JPM’s price can have knee-jerk reactions to news like this. Company-wide revenue of $16,690M was flat from the prior year, while diluted adjusted earnings per share rose 7% to $3.60 from $3.35 year-over-year. Diluted GAAP earnings per share increased 15% to $3.13 in the quarter from $2.72 in the prior year. 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.

Value is an important metric to consider when evaluating stocks. In our preliminary list of the 2023’s Dogs of the Dow, we noted the various headwinds that equities faced in 2022. Those headwinds didn’t stop blowing on Friday and are likely to keep blowing, if now howling, for another quarter or two.

On January 25th, 2023, Verizon announced fourth-quarter and full-year earnings for the period ending December 31st, 2022. Health Care, Transportation & Electronics, and Safety & Industrial grew 1.9%, 1.4%, and 1.3%, respectively. 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 315,000 people and has more than 13,000 stores. Dow noted that it would lay off about 2,000 employees globally as it aims to reduce costs by $1 billion in 2023. Due to the dour outlook, we project just $3.15 of earnings-per-share this year.