How dividend yields reveal when to invest

Dividend yields can be a useful guide as to whether or not a market is cheap. Here, Tim Bennett explains why, and reveals what yields can tell you about American stocks.

The Dogs of the Dow' is one of the most famous stock market strategies around. It's nice and simple: all you do is buy the ten highest-yielding stocks in the market over a given period (often a year, sometimes every quarter), sell them at the end of the period, then start all over again.

The argument is that by aiming for the highest-yielding stocks, you are by definition buying some of the cheapest and most hated stocks around. Given that investors tend to overreact to bad news, and drive stock prices unfairly low at times, the strategy aims to make money from achieving both a decent yield and a healthy capital gain on top.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.