Everyone has heard of the “Dogs of the Dow”, or the strategy of buying the laggards of the Dow. It is has been of the few highly successful value-based strategies over the last decade. If you have liked the Dogs of the Dow approach then check out “Fast Dogs”, which could be a good strategy. The idea is to buy the ten stocks with the fastest dividend growth in the Dow. The strategy has performed well in the last three years and just edged out the S&P 500’s performance (it is hard to track it further because dividend growth rate data is historically spotty). What will likely make this strategy successful is that companies with rising dividend growth are naturally signaling improvement and a brighter future, so an increasingly optimistic outlook is de facto. And of course, investors love dividends.
FINSUM: We like this idea. It would probably work better in rising rate markets, but generally speaking it seems like a smart approach in any environment.