Dogs of the Dow: Buffett Owns 2, Why You Need All 5

The "Dogs of the Dow" is a well-known investment strategy first published in 1991 by Michael O'Higgins. It aims to maximize returns by purchasing the 10 highest-yielding dividend stocks in the Dow Jones Industrial Average each year.

Warren Buffett, through Berkshire Hathaway, owns two of these stocks: Coca-Cola (KO) and Procter & Gamble (PG). However, analysts believe retail investors should own all five top dogs to fully benefit.

Details

The strategy is simple: at the start of each year, buy the 10 highest-yielding Dow stocks, hold them for a year, then repeat. The idea is that high-yield stocks are often undervalued, offering both capital appreciation and dividend income.

Buffett holds KO and PG, both defensive stocks with stable dividends. But experts suggest owning the top five (which also includes Verizon, Dow Inc., and others) to reduce risk and enhance returns.

Context

The Dogs of the Dow strategy has historically outperformed the Dow itself over long periods, but it is not risk-free, especially during bear markets.

What This Means for Investors

For income-seeking investors, this strategy can be a solid approach, especially with proper diversification. However, past performance does not guarantee future results.