The Dogs of the Dow is a unique investment option that involves the 10 highest-yielding dividend stocks of all the 30 Dow Jones Industrial Average components. This strategy is put into action by determining the key 10 stocks after the close of the market on the last trading day of the year, which for 2010 was today, Friday, Dec. 31, and investing an equal dollar amount into each. The idea here is that these 10 names will continue to throw off solid dividends and possibly even raise their yields in the coming year. Of course, the strategy also assumes that investors will see solid price appreciation in the future. Related: Stocks to Lead the Market in 2011 This strategy has produced decent to mixed results in the past, but for 2008 and 2009 the results vs. the total return of the Dow Jones Industrial Average weren't anything to write home about. For 2010, the popular strategy produced favorable results. The Dogs handily beat the Dow Jones Industrial Average, finishing the year up 15.5% while the Dow closed the year up 11%. Below are the results for the Dogs and the Dow for the six years prior to 2010.
If you're interested in buying the Dogs of the Dow stocks as the strategy suggests here are the 2011 Dogs of the Dow components, listed in order by highest to lowest dividend yield:
Note that our list does not include Intel ( INTC), which in November boosted its dividend by 14%, beginning with the first quarter of 2011. Indeed, with the dividend hike, Intel would yield 3.4%, which would kick GE off the list, but our list is based on current yields as of the close of trading on Friday. Thus, GE stays. A good thing about the Dogs of the Dow strategy now is that it's not as popular as it once was since the returns were so poor in 2008 and 2009. The reason the returns were lackluster in those years is because during the financial crisis, a number of the Dogs components actually cut their dividends to save cash and shore up their balance sheets. Since the strategy is now so out of favor, it could mean that the new Dogs of the Dow are ripe for some big returns in 2011.