The Dogs of the Dow investment strategy has been around for several years, first introduced by Michael O’Higgins in his book “Beating the Dow” in 1991. The strategy is simple – once a year, buy the ten highest dividend yielding stocks in the Dow Jones 30. At the end of each year rebalance, being sure to sell only after the short term capital gain timeframe has expired. Since 1973, the results have been dramatic, with an average annual return of 17.7% vs. 11.9% for the Dow Jones Industrial Average (according to www.DogsoftheDow.com).

As of December 31, 2007, the Dogs are (yield/closing price):

• Altria Group (MO), 3.95%, $75.58;
• AT&T (T), 3.83%, $41.56;
• CitiGroup (C) 7.33%, $29.44;
• DuPont (DD), 3.71%, $44.09;
• General Electric (GE), 3.34%, $37.07;
• General Motors (GM), 3.98%, $24.89;
• JP Morgan Chase (JPM), 3.46%, $43.65;
• Pfizer (PFE), 5.62%, $22.73;
• Home Depot (HD), 3.35%, $26.94;
• Verizon (VZ), 3.92%, $43.69

Let’s track the progress of these Dogs and see how it compares to our other investment strategies, the Magic Formula Index and the Power Women 50 Index.

The Dow Jones closed the year at 13,264.82 and the S&P 500 closed at 1,468.36.

Pierre Cutler
The Sacramento Executive