1. The fundamentals — why this matters
Chapter 1 of 6 · 3 min
The Dogs of the Dow strategy is one of the most well-known and simple methods for finding value stocks with high dividends on the stock exchange.
The Dogs of the Dow strategy has its origins in the USA and is built on a simple but powerful concept: each year, in January, the ten Dow Jones Industrial Average stocks that had the highest dividend yield during the previous year are selected. These ten stocks, called the 'Dogs', are then bought and held for one year. After one year the process is repeated, and the portfolio is adjusted based on the new dividend yield.
The idea is that stocks that have fallen in price and thereby obtained a higher dividend yield are often undervalued and have potential for recovery and price appreciation. Historically, the strategy has produced a return that in many cases exceeded the S&P 500 index, making it an interesting alternative for investors seeking a balance between value and income.
For AK1A Research Lab, the strategy is particularly relevant because it represents a systematic and quantifiable approach to value investing. It eliminates many of the emotional biases that often plague stock investments, such as FOMO (Fear Of Missing Out) or panic selling. By following a clear rule-based process, the risk of impulsive decisions is minimized.
Moreover, the strategy gives direct exposure to stable, established companies with strong cash flows, which is a core component of a robust long-term portfolio. This makes it an excellent tool for diversifying away from more speculative growth stocks.