With somewhat greater than a fourth of the yr behind traders, and within the face of rising rates of interest, dividend paying shares have been insulated from a few of the fairness market volatility that has impacted progress shares. Maybe one of many higher recognized earnings funding methods is investing within the Dogs of the Dow. The reputation of the technique is its singular concentrate on dividend yield. The Dogs of the Dow technique is one the place traders choose the ten shares which have the very best dividend yield from the shares within the Dow Jones Industrial Index after the shut of enterprise on the final buying and selling day of the yr. Once the ten shares are decided, an investor invests an equal greenback quantity in every of the ten shares and holds them for all the subsequent yr. As the under desk reveals, the yr thus far return for the Dow Dogs by means of April 14, 2022 equals 6.5% versus the Dow Jones Industrial Average ETF (DIA) down -4.8% and the SPDR S&P 500 Index ETF (SPY) down -7.5%. The technique has had combined outcomes through the years.
The Dow Dogs’ technique is solely centered on dividend yield and the under chart contains different dividend centered fairness methods. The high 4 performing methods are largely dividend earnings ones. Each of the highest 4 performing ones are additionally outperforming the broader S&P 500 Index. The high performing one is the Invesco S&P 500 Pure Value ETF (RPV), up 7.2% and the underside performing technique is the Invesco Pure Growth ETF (RPG), down -17.7% yr thus far. The Pure Value ETF technique just isn’t a pure dividend centered one, nevertheless, out of the 119 shares within the index, solely 12 don’t pay a dividend.
The progress model has largely outperformed worth because the finish of the 2008/2009 monetary. The first chart under reveals this outperformance. The second chart is a shorter three yr timeframe, and because the pandemic backside in March of 2020, outperformance has vacillated between progress and worth. Again, the worth model is outperforming this yr.
Contributing to worth’s outperformance is its obese within the monetary sector, 31% versus 12.5% for progress. The different two outperforming sectors for pure worth are Consumer Staples and Materials, with the pure progress model having no publicity to these two sectors. With increased rates of interest seemingly this yr, this might function extra of a profit for worth model shares versus progress model ones.
Editor’s Note: The abstract bullets for this text had been chosen by Seeking Alpha editors.