The Dogs of the Dow investment theory is a strategy that was first popularized by Michael O'Higgins book "Beating the Dow", published in 1991. The strategy really is a quite simple one to follow. You must pick a date to begin the strategy (most people choose the last day of the year). On that day each year find the ten stocks of the Dow Jones Industrial Average that have the highest dividend yield. Invest an equal amount in each of the 10 securities and hold the shares until the next year, then repeat the exact same process. 
The basic idea of this strategy is that these 10 stocks generally represent well known and mature companies that have possibly been on hard times lately, but have the financial strength to weather the storm. The dogs of the dow strategy is definitely a contrarian thinking strategy. The goal is to gain a great real return on investment by counting on the dividend yield to boost the return enormously. The dogs of the dow strategy is quite popular, so much so that some mutual fund companies have even added funds that specifically have dogs of the dow as large parts or even their entire portfolio.
So how has the dogs of the dow strategy worked over the years? The site Dogs of the Dow has a great chart, which shows the performance of the strategy over different periods. The picture is certainly a mixed one, with 2004 and 2005 being very poor for the strategy, but 2006 being a great one.
What do I make of this theory? I believe this theory is a little too simplified for me. I think that picking some of the dogs of the dow may well be a good idea, but to just randomly change your 10 stocks each year based on the strategy doesn't seem like the best idea to me. I also believe that the dogs of the dow strategy was a better strategy back in the 80's and early 90's, but today's global economy makes it less beneficial. What do you think? Do you think this strategy is a winner?
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