Time For A Dog ETF? | ETF Trends

No, I am not referring to the recently launched exchange traded fund that has the ticker symbol DOG and allows you to short the Dow Jones Industrial Average. I am talking about an ETF based on the Dogs of the Dow theory that was popular in the early 1990s and lost credibility during the roaring bull market of the late 1990s.

The Dogs have performed extremely well this year with a gain of 14.8% as of August 15th when compared to 4.8% for the Dow and 3% for the S&P 500. Once we include dividends, the gains from the Dogs of the Dow theory jump to 17.4%. (taking into account that GM slashed its dividend in half early this year). Some high dividend yielding ETFs such as the iShares Dow Jones Select Dividend Index (DVY) and the PowerShares HighYield Dividend Achievers (PEY) already exist and may appear to be similar to the Dogs of the Dow. However their returns tell a different story. DVY is showing gains of 7.9% YTD while PEY has posted gains of only 4%.

So is it time for another high dividend yielding ETF based on the Dogs of the Dow theory? Probably not, as the theory is very simple to follow and investors could just as easily buy the 10 stocks individually. However if an index were to be created that included the Dogs of the Dow, the Dogs of the S&P 500 and another variation of the theory that uses share buybacks, we might have a very interesting index indeed.


Asif Suria is a guest author at ETFtrends and the editor of an investment newsletter called SINLetter. The author of this article is not a registered financial advisor and does not give investment advice. This article does not comprise any solicitation to buy or sell securities, ETFs or other investment vehicles.