Dogs of the Dow, Revisited

The Dogs of the Dow (the ten highest yielders) are beating the whole index so far in 2010. This doesn't happen every year. But there are reasons, based on the configuration of the Dow at the end of 2009, that it is happening this year.

To a greater extent than has been the case in the twentieth century, most of the Dogs of the first decade of the twenty-first century have been "perennials" (repeaters). These include the telecom company Verizon (VZ), since it joined the Dow in 2004, and AT&T (T) (the former SBC) which has been on the list for all of the new century; it was last off it in the late 1990s. Chemical maker DuPont (DD) has been a "Dog" every year in the current century, as has Kraft (KFT), and its predecessors Altria (MO) and Philip Morris (PM). Pharmaceuticals Merck (MRK) and Pfizer (PFE) "belong" on the list; the one year that each wasn't was a sign of overvaluation.

Banks such as Citigroup (C) and JP Morgan Chase (JPM) were on the list for most of the decade, until the dividend cuts of 2008-2009, as was the case with General Motors and General Electric (GE), industrial companies with large "captive" finance operations. (more)