The Dogs of the Dow is an investment strategy that involves picking annually the ten highest dividend-paying Dow Jones Industrial Average stocks. Applying this theory to the British equity market, the Dogs of the FTSE 100 strategy selects the 10 FTSE 100 stocks with the highest dividend yields. This strategy has worked out well in the past in terms of returns. From a 2016 article in Money Observer:
Over the past 15 years the Dogs strategy has produced spectacular performance. For example, the 10 Dogs of 2009 made an average return of 86.5 per cent after one year compared with 31.9 per cent for the FTSE 100 index (dividends reinvested).
The Dogs are also well ahead over the past 15 years, growing by an average annual 12.2 per cent in total return terms, two-and-a-half times the 4.8 per cent total return figure for the FTSE 100 index.
However, 2015 proved a more challenging year, and for only the fourth time in their 15-year history, last year’s Dogs underperformed the FTSE 100 index. They suffered total return losses of almost 13 per cent, twice those of the Footsie.
Source: Dogs of The Footsie 2016 portfolio, Money Observer
Note: All returns shown above are in the domestic currency (i.e. British Pounds)
The Dogs of the FTSE 100 list for 2017 includes some of the top UK firms. US investors looking to gain exposure to the UK market can use this list as a starting point for additional research.
Two key points to remember about investing in British ADRs are:
- The UK does not charge dividend withholding taxes for US investors (except ones paid out by REITs)
- British companies traditionally have had one of the highest dividend yirlds in the developed world. Currently the dividend yield on the FTSE 100 is 3.76% compared to around 2% for the S&P 500.
The current Dogs of the Footsie 100 are listed below with their ADR tickers and dividend yield:
1.Company: Royal Dutch Shell PLC (RDS.A)
Current Dividend Yield: 7.17%
2.Company: BP PLC (BP)
Current Dividend Yield: 7.04%
3.Company: Capita Plc
Does not trade on the US markets
4.Company: HSBC Holdings PLC (HBC)
Current Dividend Yield: 8.78%
5.Company:SSE PLC (SSEZY)
Current Dividend Yield: 8.06%
6.Company: Vodafone Group PLC (VOD)
Current Dividend Yield: 6.06%
7.Company: Persimmon PLC (PSMMY)
Current Dividend Yield: 6.43%
8.Company: Legal & General PLC (LGGNY)
Current Dividend Yield: 6.25%
9.Company: Marks & Spencer Plc(MAKSY)
Current Dividend Yield: 7.38%
10.Company: Royal Mail Plc (ROYMY)
Current Dividend Yield: 7.80%
Note: Dividend yields noted above are as of Mar 3, 2017. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.
Source: Dogs of the Footsie 2017: 10 shares yielding 5 per cent plus, Money Observer, Mar 1, 2017′
Disclosure: No Positions