Next year, five new stocks are due to enter a basket of equities long used by investors on the hunt for a steady income stream. The “Dogs of the Dow,” a strategy popularized by investor Michael O’Higgins in the early 1990s, comprises the 10 members of the Dow Jones Industrial Average with the highest dividend yields. By buying these names, investors bet on receiving a steady stream of cash payouts, in addition to their stock prices appreciating. These stocks also tend to be of higher quality given their inclusion in the 30-stock Dow. Additionally, because dividend yields tend to rise as stock prices fall, investors buying into this strategy could be investing in names that are relatively cheap and poised for a rebound. Just six of the stocks from 2024’s basket are expected to be among the Dow’s top 10 dividend yielders for next year. As of Tuesday, these names included Verizon Communications , Chevron , Amgen , Coca-Cola , International Business Machines and Cisco Systems . The list could still change by the end of the year. But just because a stock is included in the “Dogs of the Dow” list does not mean it will necessarily outperform going forward, cautioned Kevin Simpson, founder and chief investment officer at Capital Wealth Planning. “The idea here is that just because they’re ‘Dogs of the Dow’ — some of them really are dogs — and you have to be careful and selective as a stock picker,” he told CNBC in an interview. Investors do not necessarily need to buy all 10 stocks to buy into the strategy. Simpson himself currently owns seven of the 10 names on 2025’s preliminary list, including Verizon Communications, McDonald’s and Procter & Gamble . Most analysts covering telecommunications giant Verizon have a cautious view on the stock, with a majority rating it as a hold, according to LSEG. However, the average price target implies upside of 11%. Shares of Verizon have climbed 11% in 2024. Including reinvested dividends, the stock has returned around 19%. Analysts are more bullish on shares of McDonald’s and Procter & Gamble, with the average price target corresponding to respective potential gains of 10% and 7%, LSEG data shows. Shares of fast-food giant McDonald’s are unchanged on the year but have a total return of 3.7%. The total return for consumer goods manufacturer Procter & Gamble comes in at 20%, and the stock has surged 16% in 2024. Meanwhile, Simpson pointed out that two of the names from 2024’s list — Walgreens Boots Alliance and Dow Inc. — would have made next year’s list, had they not been removed from the Dow Jones index earlier this year. Walgreens was replaced by Amazon in February, while Sherwin-Williams took Dow Inc.’s place in November. The stocks yield more than 9% and over 6%, respectively. Similarly, had Nvidia not replaced Intel in the blue-chip index last month, Intel would have also made 2025’s “Dogs of the Dow” list, Simpson added. Some of the 2024 Dogs outperformed the broader market. Goldman Sachs has returned more than 56% to shareholders this year, while 3M and IBM have seen total returns of more than 46% each. — CNBC’s Jesse Pound contributed to this report.
