One time-honored investment strategy absolutely smoked the indexes in 2016, the venerable Dow Dogs! The basic strategy of simply buying the 10 highest-yielding stocks in the Dow Jones Industrial Average – known as the Dogs of the Dow – beat the Dow, and most other stock market indexes, by a wide margin in 2016.

Written by Mike Burnick

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• An equally weighted portfolio of the Dow Dogs, constructed on December 31, 2015, gained nearly 21% this year, compared to a gain of just 14.4% for all 30 stocks in the Dow Jones Industrial Average, and a gain of just 10.7% for the S&P 500 Index.
• Y...ou would have started 2016 already ahead of the game, with a hefty average dividend yield of 3.85% from the 10 Dow dogs – nearly twice the yield of the overall stock market!
• ...The Dow Dogs have beaten the Dow Jones Industrials in 5 out of the last 6 years, including 2016.
• Over the past 5 years alone, the Dogs’ average annual gain is 14.9%, compared to just 11.7% for the Dow itself...

...To see which high dividend yielding Dow stocks make it into the dog pound for 2017, see the table below:

8 of the 10 mutts are returning for the year ahead (the top 5 performing Dogs of 2016 - Caterpillar, Chevron, IBM, Verizon and Exxon Mobil - which is quite an accomplishment because, typically, superior price performance reduces the dividend yield and lets last year’s dogs graduate from the pound - as well as Cisco Systems, Pfizer, Procter & Gamble) plus two new dogs -  Intel (INTC) and Coca-Cola (KO) replacing Wal-Mart (WMT) and Merck (MRK) - in the dog pound next year.

Bottom line:

While relatively few stock investment strategies stand the test of time, the Dogs of the Dow has a very good track record at beating the market. Plus, there aren’t many strategies as easy for you to execute as buying and holding ten blue-chip stocks that pay attractive dividends while waiting for price appreciation.