I originally learned of the Dogs Of The Dow strategy from my father in law who was playing with it at the time.
The idea for the Dogs Of The Dow strategy was put forth by Michael O’Higgins in his book Beating The Dow. The strategy is to invest equal amounts in the 10 highest yielding stocks on the Dow Jones index. These top 10 yielding stocks are referred to as the Dogs Of The Dow. The idea is to buy low and sell high. That the 10 stocks with highest yields have dropped in price. But it also relies on the idea that all of the companies in the Dow Jones index are strong companies, and strong enough to survive the down times. You hold the stocks for one year, and then sell the stocks that are no longer part of the Dogs Of The Dow, and buy the new dogs.
There are a bunch of variations of the Dogs Of The Dow strategy. For instance you can buy 9 of the top 10 yielding stocks, not buy the top most yielding stock. The top most yielding stock is often a very trouble company. Another variation is to buy the five lowest priced stocks of the Dogs Of The Dow. This is called the Small Dogs Of The Dow. Motley Fool put forth a variation called the Foolish Four. They have since admitted that it didn’t work as well as they though in the long run.
People are always looking for simple stock picking ideas that don’t require the work of stock research. The problem with ideas like this is that people start using the idea to pick the stocks. When enough people follow the strategy it affects the price of the stocks, and messes up the whole thing. Keep in mind almost any stock picking strategy works in a strong bull market!
I played with the Dogs Of The Dow briefly, and then dropped the strategy.