Dogs of the Dow 2023: Did the Strategy Still Have Teeth?
Updated Jan 26, 2026
The Strategy That Refuses to Die
The “Dogs of the Dow” strategy traces its roots back to Charles Dow himself, the founder of Dow Theory and the architect of what would become one of the world’s most watched market indices. This contrarian investment approach aims to outperform the Dow Jones Industrial Average by identifying the ten highest-yielding blue-chip stocks within the index each year. The underlying assumption? These companies aren’t fundamentally broken—they’re temporarily undervalued, beaten down by market sentiment, and positioned for a return to their true worth.
Charles Dow understood something fundamental about markets that remains true today: stocks and indices move in cycles. He believed that grasping these patterns was essential for investment success. The Dogs of the Dow method capitalizes on this insight by focusing on stocks currently in the doghouse, generally overlooked or actively avoided by most investors who prefer chasing whatever’s hot.
The ancient Greek statesman Solon believed that “Learning is not wisdom; the essence of wisdom is seeing what is valuable and holding fast to it.” This philosophy sits at the heart of the Dogs strategy—the critical importance lies in that initial stock selection. Investors who embrace this approach need both wisdom and courage, venturing into territories others are fleeing, potentially reaping rewards through both capital appreciation and substantial dividend income.
Yet we need to acknowledge something important: market dynamics have shifted dramatically since Charles Dow’s era. Many modern analysts argue that today’s flood of real-time data and sophisticated analytical tools have fundamentally revolutionized how investing works. The traditional annual selection based solely on dividend yields might not fully account for the rapid changes in economic indicators or global events that can drastically influence stock performance within months or even weeks.
To effectively apply the Dogs of the Dow strategy in 2026, you need to blend historical wisdom with contemporary market realities. This means combining analytical skill—identifying which stocks are genuinely undervalued rather than simply distressed beyond repair—with the insight to understand broader market sentiment and economic currents.
Machiavelli observed that “Whosoever desires constant success must change his conduct with the times.” This insight rings particularly true in modern investing, suggesting the necessity for ongoing adaptation and evolution in strategy. A successful investor must be contrarian not just in stock selection but in thinking itself, ready to challenge established norms and adapt approaches to meet the constantly shifting financial landscape.
In essence, while the Dogs of the Dow strategy offers a structured path to potentially higher returns through disciplined investment in high-dividend-yielding stocks, achieving effectiveness in today’s markets demands nuance. You need both historical perspective and contemporary market analysis. The strategy requires a contrarian stance combined with deep understanding of fundamentals and broader economic context. As Sir John Templeton wisely noted: “The four most dangerous words in investing are: ‘this time it’s different’.”
How the Dogs Actually Performed in 2023
In 2023, the Dogs of the Dow strategy—deeply rooted in Charles Dow’s investment principles—focused on the ten highest-yielding blue-chip stocks within the Dow Jones Industrial Average. Designed to capitalize on what appears as undervalued stocks primed for rebounds, the strategy showed unique resilience during a year marked by considerable economic uncertainty.
The numbers tell an interesting story. The Dogs ended 2023 with modest overall gains. Despite a price decline of 1.8%, when combined with the dividend yield of approximately 4%, the total return came to about 2%. What makes this particularly notable? It marked the first time since 2018 that the Dogs outperformed the broader Dow Jones Industrial Average—beating it by roughly seven percentage points.
Machiavelli would have appreciated the strategic patience required to stick with high-yield stocks despite market volatility, embodying his advice that success demands adapting conduct to the times. This adaptability proves crucial when responding to the dynamic conditions markets constantly throw at investors.
Cicero’s thoughts on solid foundations resonate with the Dogs approach. He stated, “The roots of education are bitter, but the fruit is sweet.” Similarly, the initial bitter phase of investing in undervalued stocks can eventually yield sweet returns, as evidenced by the strategy’s 2023 performance against expectations.
Solon’s emphasis on wisdom and enduring value aligns with the strategy’s focus on blue-chip stocks—companies often considered foundational portfolio components due to their historical stability and consistent dividend payouts.
Sir John Templeton famously noted that “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” The Dogs of the Dow strategy capitalizes precisely on this principle by investing in stocks that others are pessimistic about, aiming to reap benefits when market sentiment eventually shifts.
The 2023 performance underscores the potential of this time-tested strategy to navigate economic uncertainties and market fluctuations. By adhering to principles established by seasoned investors and integrating philosophical wisdom, the approach continues offering a compelling path for those seeking high-yield, blue-chip stock investments.
The Tactical Investor Approach in Action
Using proprietary indicators, we identified an optimal window to purchase NKE between November 2017 and January 2018. During that period, the stock fluctuated between $49 and approximately $60. Assuming entry at $55.00, we held the position until July 2018, closing when the stock traded in extremely overbought ranges. Exiting somewhere between $82-$85 would have realized gains around 50%.
While NKE continued climbing afterward, we didn’t chase it. The philosophy is straightforward: buy when nobody’s paying attention and the stock trades in extremely oversold ranges, then close positions when trading becomes extremely overbought. This approach testifies to our contrarian philosophy—focusing on stocks with tremendous potential that the masses currently dislike. Our methodology proves vastly superior regarding returns because we put concepts of mass psychology and contrarian investing into practice, ensuring we position on the right side of market movements.
Our 2019 Dogs Selection
We don’t provide the complete list publicly—it’s a bonus service reserved for market update subscribers. However, we’ll share four candidates to illustrate the approach.
The concept is elegantly simple: purchase shares in all four companies, allocating the same dollar amount to each. Hold them until they’re trading in extremely overbought territory, then repeat the process with the next year’s selections. We use proprietary indicators to determine overbought and oversold conditions, though several standard indicators should help average investors identify when stocks have been oversold or pushed into extremely overbought ranges.
The Small Dogs Might Pack a Bigger Punch
Looking back over the past two decades, both the traditional Dogs of the Dow and the broader Dow Jones Industrial Average have delivered investors an annualized return of 10.8%. This interesting parallel suggests consistent performance regardless of broader market volatility. To put these figures in perspective: an initial $1,000 investment in the S&P 500 would have grown to $6,254 over this period, while the same amount in either the Dogs or the entire Dow would have reached $7,776.
Here’s where it gets really interesting. According to data from The College Investor, the Small Dogs of the Dow—which focuses on the five lowest-priced stocks among the ten high-yielders—would have transformed that same $1,000 into $10,734.
As Plato observed, “Excellence is not a gift, but a skill that takes practice.” This principle holds in investing, where strategies like the Small Dogs require careful selection and consistent evaluation to realize their full potential.
Small Dogs vs. Traditional Dogs
The traditional “Dogs of the Dow” involves yearly selection of the ten highest-yielding stocks in the Dow Jones Industrial Average. The “Small Dogs of the Dow” refines this by choosing the five lowest-priced among these ten stocks. Over the years, this more focused approach has demonstrated its merit.
A Forbes study covering 2003 to 2013 revealed that the Small Dogs outperformed the broader Dogs strategy in nine out of ten years. They also exceeded the Dow Jones Industrial Average’s performance in seven of those years. The apparent advantage? Small Dogs combine high yields with lower prices, offering potential for both income and growth. This dual benefit supports Erasmus’s idea that proper foundations lead to success—the right selection and nurturing of growth stocks pays off over time.
A New York Times analysis echoed these findings, showing that between 1988 and 2009, the Small Dogs strategy outperformed traditional Dogs by an average of 3% annually. This suggests that more focused investment in fewer stocks could yield greater returns, reflecting Montaigne’s belief in depth over breadth: “Better to wear out than to rust out.”
What Investors Should Consider
While historical data supports the effectiveness of both Dogs strategies—especially the Small Dogs approach—it’s crucial to acknowledge that past performance never guarantees future results. Investment strategies carry inherent risks, and the Dogs strategies’ success may not necessarily continue under changing economic conditions or evolving market dynamics.
Investors considering these approaches should carefully evaluate their investment goals, risk tolerance, and time horizon. Consulting with a financial advisor can provide tailored guidance, helping align specific financial objectives with appropriate investment strategies. This thorough approach ensures decisions are based not just on historical success but adapted to personal financial circumstances and realistic expectations about future market conditions.
