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Fast Money

This timeless strategy could work in 2016: Technician

Dogs of the Dow play

As the Dow Jones industrial average faces its first annual loss since 2008, some investors are turning to a time-tested investment strategy to harvest gains in 2016: "the dogs of the Dow."

"It's not just buying weak stocks; it's buying 10 stocks with the highest dividend yield, the presumption that Dow stocks don't cut their dividend," Cornerstone Macros' Carter Worth said on CNBC's "Fast Money."

The dogs of the Dow theory is a classic investment strategy where one invests in the 10 Dow stocks with the highest dividend yield at the end of each year and hold those stocks for exactly one year. The strategy has yielded strong gains through the years. In 10 of the last 15 years, the dogs of the Dow have outperformed the market, according to Worth.

This year's dogs of the Dow with the highest dividend yield are Verizon, Chevron, and Caterpillar. They're down a respective 3 percent, 20 percent and 29 percent this year while the Dow had logged a 3.5 percent loss in 2015. Each of those stocks sport a dividend yield that is double that of the Dow Jones industrial average dividend yield rise of 1.8 percent.

If history is any indication, Procter & Gamble is about to become a prime beneficiary of this popular dividend-investing strategy. The consumer goods company meets both requirements, lagging the Dow nearly 14 percent on the year, and offering the eighth-highest dividend in the Dow with a 3.4 percent yield.

And according Worth's chart work, Procter & Gamble is about to make a major comeback. The chart reflects a well-defined trend line that has succumb to several breaks, which according to Worth, would imply a move higher.

"Either way you cut it, I think this is going to be a good place to put some money if you want to play dogs of the Dow theory" said Worth.