Dogs of the Dow: A Closer Look at the Flying Five Trading Strategy

(List compiled by Andrew Dominguez. Data sourced from Finviz on August 1, 2011. Disclosure: Andrew Dominguez owns GE shares.)

Looking for a quick and simple investing strategy that has worked wonders in the past? Check out the “Flying Five Strategy”. 

It was first developed in 1991 and is derived from the “Dogs of the Dow” strategy. The “Dogs” strategy involves investing in the 10 stocks with the highest dividend yields in the Dow Jones Industrial Average (DJIA).

Once you have found the “Dogs,” finding the “Flying Five” (aka “The Small Dogs of the Dow”) is easy. You simply take the 10 “Dogs” and find the five with the lowest share prices. 

As soon as you have found the “Flying Five”, you invest equal amounts in each of the stocks, and then hold them for 12 months, after which you reevaluate the DJIA to find the new “Flying Five”.

SmartInvestingStrategies.com best explains the strategy’s underlying logic: “you are investing in large, solid well known companies that are temporarily out of favour and are trading at reduced prices.”

Last year’s “Flying Five” returned an average of 29%. The stocks that comprised the group were Home Depot (HD), Pfizer (PFE), Verizon (VZ), AT&T (T), and Kraft Foods (KFT).

And without further ado, here is this year’s “Flying Five” (assuming you were to start investing today).

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List sorted by dividend yield.

1. General Electric Co. (GE): Conglomerates industry with a market cap of $190.58B. Dividend yield at 3.34%. Price at $17.97.

2. Pfizer Inc. (PFE): Major Drug Manufacturers industry with a market cap of $150.2B. Dividend yield at 4.21%. Price at $19.01.

3. Intel Corporation (INTC): Broad Line Semiconductor industry with a market cap of $117.92B. Dividend yield at 3.78%. Price at $22.24.

4. AT&T, Inc. (T): Domestic Telecom Services industry with a market cap of $174.82B. Dividend yield at 5.83%. Price at $29.52.

5. Merck & Co. Inc. (MRK): Major Drug Manufacturers industry with a market cap of $103.22B. Dividend yield at 4.55%. Price at $33.44.

Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


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