Dogs of the Dow

Devised by US fund manager Michael O’Higgins, this strategy exploits the tendency for stockmarkets to overreact to bad news, which throws up cheap shares.

Fans of the theory say that bargains can be spotted by looking for high dividend yields – the annual dividend as a proportion of the current share price. Buy these and you not only get a big income, but the likelihood of capital gains too when share prices recover.

Between 2003 and 2007, for example, Peter Temple regularly picked the five companies with the lowest share prices from the top ten yielding stocks. His annual gains ranged from 30% to 117%. Over the last year, however, high-yield strategies have struggled. That’s because a big dividend may simply be a result of the share price falling because the company’s outlook is poor.

The risk is that the dividend is then cut, resulting in further steep share price falls.

• See Tim Bennett’s video tutorial: How to pick income winners: What are dividends?


Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.