The Dogs of the Dow – those high-yielding stocks that are supposed to represent the bottom of the blue-chip barrel – have some unlikely company.
General Electric once stood as the bellwether of American industry but now sits among the 10 Dow stocks that produce the highest yield and, theoretically at least, represent the most risk for investors.
GE’s yield is clocking in at a robust 3.6 percent, more than double the 1.7 percent that Dow stalwart Caterpillar produces. (GE is minority owner of CNBC.com-parent NBC Universal.)
Joining GE as newcomers to the 2012 Dog pound is Procter & Gamble, with a 3.2 percent yield.
The two companies replace Chevron (3 percent) and McDonald’s (2.8 percent), both of which boosted the Dogs to the status as one of the top trades of 2011.
As the Dow 30 gained about 5 percent and the Standard & Poor’s 500 finished flat for the year, the Dogs posted an average total return of 16.7 percent, according to calculations from Bank of America Merrill Lynch.
Dog-lovers back the strategy of picking the high-yielders on the notion that the stocks are oversold and ready for a rebound.
But the strategy has been a loser so far in 2012.
The Dogs, as tracked through their ETF proxy, the Deutsche Bank ELEMENTS Dogs has gained just 1.2 percent even though the Dow had gained 3.7 percent and the S&P 500 4.5 percent heading into Wednesday trading.
That’s been the story of trading this year: What worked in 2011 has faltered in 2012. High-yield boomed last year but has faltered this year; high short interest worked as a contrary indicator then but not so much now, and non-domestic stocks are crushing their U.S.-based counterparts, again reversing a 2011 trend.
Still, the Dog collar hasn’t chased away those who believe the hunt for yield will resume.
“Yield is expected to remain scarce as the 76 million baby boomers head into their retirement years,” said Mary Ann Bartels, technical research analyst at BofA. “The equity market is supplying an abundance of yield and investors can get paid to wait for price appreciation.”
The rest of the current Dog pack: AT&T , DuPont , Intel , Johnson & Johnson , Kraft Foods , Merck, Pfizer and Verizon.
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