NEW YORK ( TheStreet) -- Some of last year's Dogs of the Dow, the laggard stocks in the Dow Jones Industrial Average with the biggest dividend yields, aren't getting any prettier this year. And maybe they'll turn into mutts for 2012.

The Dogs of the Dow theory posits that underperforming companies in one year become outperformers in the next. Record volatility in the stock market has upended that investment strategy, with three of the worst-performing companies this year -- Bank of America ( BAC), Alcoa ( AA) and Hewlett-Packard ( HPQ) -- having been included in the bottom five in 2010. Next year may not be any better for those companies, as each faces deep-seated problems they can't solve quickly.

Despite the volatility, the Dow Jones Industrial Average has declined only 1.8% so far in 2011 after increasing 11% last year. The 30-member Dow has outperformed the broader S&P 500 Index and the tech-heavy Nasdaq, which are down 6% and 7%, respectively.

With political upheaval in Europe and the U.S., a debt overhang that threatens to topple Europe, and slowing economic growth at home and abroad, at least the first half of 2012 will be clouded by uncertainty. So the laggards may not become leaders.

The other two stocks in the bottom five, JPMorgan ( JPM) and General Electric ( GE), stand out as those that could rebound. JPMorgan is burying rivals including Bank of America and Citigroup ( C), while General Electric has cut so much waste that any revenue increase quickly will filter into profits.

That said, JPMorgan could have a tougher time rallying in 2012 given the European debt crisis and its potential implications, but stands to benefit from any pickup in the banking industry because of its position as a leading financial institution. In addition to its high yield, General Electric is trading at a discount to peers, making it a more attractive investment.

Here are the five worst-performing Dow stocks of 2011. Below they are ordered by return, from bad to worst.

5. General Electric is a diversified industrial company.

Its stock has tumbled 16% in 2011. Earlier this year, the earthquake and subsequent tsunami in Japan drew criticism to GE's design of nuclear reactors at the crippled Fukushima power plant. A questionable tax benefit wiped out taxes owed in 2010 and alarm over CEO Jeffrey Immelt's compensation also drew negative press.

General Electric's stock trades at a forward earnings multiple of 9.6 and has a dividend yield of 4%.


4. JPMorgan is a diversified financial-services company, offering card services, and retail, commercial and investment banking.

The bank's stock has tumbled 29% in 2011 and is down 17% in the past three months. JPMorgan has largely been a victim of the trends in the broader financial sector. Slowing business, increased regulation and significant uncertainty over the European sovereign debt crisis have weighed heavily on the stock.

JPMorgan is one of only two banks included in the Dow Jones Industrial Average. Overall, JPMorgan has fared much better than its banking peers.

JPMorgan's stock trades at a forward earnings multiple of 6 and has a dividend yield of 3.4%.

3. Hewlett-Packard sells IT services, and computer software and hardware.

The company's stock has tumbled 36% in 2011, in part, due to uncertainty over its strategy. The company has been front and center in the news all year, with plans to buy software company Autonomy, the closing of HP's Palm WebOS smartphone and tablet unit, the potential spinoff of its PC division, then the decision to keep the PC division, the ousting of CEO Leo Apotheker, and the introduction replacement CEO Meg Whitman, previously of eBay.

Fiscal fourth-quarter earnings per share fell 12% to $1.17 on a 3% decline in revenue. HP has $8 billion of cash and $30 billion of debt. Its stock trades at a forward earnings multiple of 6.3 and has a dividend yield of 1.81%.


2. Alcoa produces and sells aluminum.

The commodities firm's stock has dropped 39% this year and is down 21% in the past three months. Aluminum prices have been falling, which has been putting pressure on profit margins. Demand remains weak, with the manufacturing business in Europe and China expected to slow, pushing the price of the stock down.

At a price-to-earnings multiple of 9, the valuation on this stock is reasonable.

1. Bank of America is a diversified financial-services company, and a main competitor to JPMorgan and Citigroup.

The stock of the troubled bank has fallen 60% this year on concern the company doesn't have enough required capital to fund its business. In addition, a $10 billion lawsuit by American International Group accuses the bank of fraud in the sale of mortgage-backed securities to AIG after the acquisition of Merrill Lynch and Countrywide Financial between 2005 and 2007.

Bank of America's stock has dropped 16% in the past three months, despite an investment by billionaire investor Warren Buffett.

Bank of America's stock trades at a forward earnings multiple of 5.4.

>>To see these stocks in action, visit the 5 Worst-Performing Dow Stocks of the Year portfolio on Stockpickr.

For more investing ideas, visit TheStreet Ratings' top-rated stocks for 2012.

-- Written by Lindsey Bell in New York.

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