Use this ETF for the “Dogs of the Dow” exhibition
IIt’s that time of year again: it’s time to take a look at the 10 stocks that will be next year’s “Dogs of the Dow” and the exchange-traded funds that can help investors embrace those stocks. without having to pay capital for 10 different shares.
As seasoned dividend investors know, the “dogs of the Dow” theory is easy to understand and to practice. It is based on purchasing the 10 members of the Dow Jones Industrial Average that have the highest dividend yields at the end of the year, based on the fact that these names have the potential to outperform the year ahead. .
An effective way to put this plan in place is to Invesco Dow Jones Industrial Average Dividend ETF (DJD). DJD tracks the Dow Jones Industrial Average Yield Weighted Index, which is the return-weighted equivalent of the standard Dow. Due to the emphasis on dividends, DJD does not own all 30 Dow shares. Cloud computing giant Salesforce.com (NYSE: CRM) doesn’t pay a dividend, so it’s not on the DJD list.
Still, DJD is an effective way to access the dogs of the Dow while covering some risks and boosting income.
“They’re dogs for a reason, but when you have these great companies with incredibly long and stellar track records, they have bumps along the way but can react,” said Kevin Simpson, Founder and Chief Investment Officer of Capital Wealth. Planning, in an interview with CNBC.
Ranked by highest to lowest dividend yield, these are the Dogs of the Dow for 2022: Dow, Inc. (NYSE: DOW), International Business Machines (NYSE: IBM), Verizon (NYSE: VZ), Chevron (NYSE : CVX), Walgreens (NASDAQ: WBA), Merck (NYSE: MRK), Amgen (NASDAQ: AMGN), 3M (NYSE: MMM), Coca-Cola (NYSE: KO) and Intel (NASDAQ: INTC).
When it comes to DJD, investors should remember that dogs are ranked based on their dividend yields at the end of a year. For its part, the Invesco ETF weights holdings according to “their 12-month dividend yield over the previous 12 months,” according to the issuer.
Translation: While Dow is the highest yielding among dogs as it stands, it is simply DJD’s fourth highest holding. Oil giant Chevron (NYSE: CVX), fourth in performance among dogs, is DJD’s largest stake with almost 10% weight.
Even without Salesforce and the focus on performance, DJD is performing mostly in line with the traditional Dow Jones Industrial Average this year, and the Invesco ETF is reporting 140 basis points higher than the standard iteration. of the Dow.
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