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3/26/2013

10 Best Growing Dogs Of The Dow Jones - Portfolio Strategy

Dogs of the Dow Jones originally published on “long-term-investments.blogspot.com”. Stock prices go up and yields come down. That’s a major fact we have realized over the recent years. Now, the S&P 500 has a current yield of 2.0 percent (despite dividend hikes) and the P/E ratio of the index is at 18.08.

I like it when stocks are cheap. Sure they maybe cheap now if you count on growth and a recovering economy but every rising stock market will come down one day. I prefer to buy stocks in times when nobody wants equities and everybody is expecting that the world’s economy and financial system dies. That’s the right time but it’s not today in my view.

Dividend Yield of the S&P 500

P/E of the S&P 500

The years 2000 and 2008 were two great years for investors to start an investor career. If you invest money into the stock market when others fear to lose money, you will be compensated by higher returns. Over the long-term, the economy will improve and your assets grow.

The time is not the best for long-term investors with a demand for higher yields. They must look at classical strategies to grow money. An often mentioned and well known strategy is the Dog of the Dow Theory. 

The philosophy is to buy 10 stocks of the Dow Jones with the highest dividend yield and lowest price to earnings ratio at the beginning of the year and to hold these stocks for a year. After this period, the investor should sell stocks that are no more Dogs of the Dow and buy therefore new Dogs of the Dow. 

Below is an updated sheet of the 10 best Dogs of the Dow. Such stocks have the lowest expected price to earnings ratio and highest dividend yield within the Dow Jones Index.

These are the 3 Dogs with highest expected earnings growth:
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Intel Corporation (NASDAQ:INTC) has a market capitalization of $107.65 billion. The company employs 105,000 people, generates revenue of $53.341 billion and has a net income of $11.005 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $22.160 million. The EBITDA margin is 41.54 percent (the operating margin is 27.44 percent and the net profit margin 20.63 percent).

Financial Analysis: The total debt represents 15.94 percent of the company’s assets and the total debt in relation to the equity amounts to 26.26 percent. Due to the financial situation, a return on equity of 22.66 percent was realized. Twelve trailing months earnings per share reached a value of $2.13. Last fiscal year, the company paid $0.87 in the form of dividends to shareholders.


Market Valuation: Here are the price ratios of the company: The P/E ratio is 10.22, the P/S ratio is 2.02 and the P/B ratio is finally 2.10. The dividend yield amounts to 4.14 percent and the beta ratio has a value of 1.02.


INTC Dividend Chart

INTC Dividend Yield Chart

General Electric (NYSE:GE) has a market capitalization of $240.41 billion. The company employs 305,000 people, generates revenue of $147.359 billion and has a net income of $14.902 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $28.367 billion. The EBITDA margin is 19.25 percent (the operating margin is 11.81 percent and the net profit margin 10.11 percent).


Financial Analysis: The total debt represents 60.42 percent of the company’s assets and the total debt in relation to the equity amounts to 336.56 percent. Due to the financial situation, a return on equity of 12.24 percent was realized. Twelve trailing months earnings per share reached a value of $1.39. Last fiscal year, the company paid $0.70 in the form of dividends to shareholders.


Market Valuation: Here are the price ratios of the company: The P/E ratio is 16.65, the P/S ratio is 1.63 and the P/B ratio is finally 1.96. The dividend yield amounts to 3.29 percent and the beta ratio has a value of 1.63.


GE Dividend Chart

GE Dividend Yield Chart

McDonald's (NYSE:MCD) has a market capitalization of $98.77 billion. The company employs 440,000 people, generates revenue of $27.567 billion and has a net income of $5.464 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $9.965 billion. The EBITDA margin is 36.15 percent (the operating margin is 31.21 percent and the net profit margin 19.82 percent).


Financial Analysis: The total debt represents 38.52 percent of the company’s assets and the total debt in relation to the equity amounts to 89.14 percent. Due to the financial situation, a return on equity of 36.82 percent was realized. Twelve trailing months earnings per share reached a value of $5.36. Last fiscal year, the company paid $2.87 in the form of dividends to shareholders.


Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.38, the P/S ratio is 3.58 and the P/B ratio is finally 6.46. The dividend yield amounts to 3.13 percent and the beta ratio has a value of 0.40.


MCD Dividend Chart

MCD Dividend Yield Chart

The 10 cheapest stocks of the Dow Jones have an average dividend yield of 3.67 percent as well as a forward P/E ratio of 12.57. The average P/B ratio amounts to 3.33 and P/S ratio is 2.42.

Here is the table of the Dogs with some fundamentals:

Dogs of the Dow Jones (Click to enlarge)

Related Stock Ticker Symbols:
T, VZ, INTC, MRK, DD, PFE, MSFT, GE, JNJ, MCD

Selected Articles:

*I am long INTC, JNJ, GE and MCD. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

For the other stocks: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.

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