The Dogs of the Dow strategy has long been popular among investors. McQueen, Shields, and Thorley (1997) find that while the strategy beat the Dow with statistical significance the results were not economically significant. However, Filbeck, Holzhauer, and Zhao (2017) examine a variation of the Dogs of the Dow using Fortune’s Most Admired Companies and find it beats the S&P 500 on a risk-adjusted basis with both statistical and economic significance. We test another variation that applies the Dogs of the Dow strategy to the S&P 500, selecting the five highest dividend yield stocks from each S&P 500 sector. We compare returns of this Sector Dogs strategy to those of the Dogs of the Dow and the S&P. We find that this strategy produces significantly higher raw returns. The Sector Dogs also significantly outperforms the S&P in terms of the Treynor Ratio and Jensen’s Alpha.
Author(s): Brett Cotten, Autumn Wilson, Alan Tidwell
