Will These 10 Blue Chips Outperform in 2014?

Wall Street

There are countless strategies to employ when investing in stocks. One of the easiest and most well-known strategies — especially during this time of the year — is called the Dogs of the Dow. The strategy requires investors to buy an equal amount of the ten highest yielding stocks found in the Dow Jones Industrial Average at the beginning of the year. Those ten stocks are then replaced the following year using the same process.

It can be difficult for some investors to stomach this strategy, because investors are only paying attention to dividend yields as opposed to many other fundamental factors. Furthermore, betting on the dogs can be hit or miss. They outperformed in 2010 and 2011, but underperformed in 2012. Over the past twenty years, the dogs have traded mostly inline with the broader blue-chip average.

In 2013, the Dogs of the Dow are up an average of 30.3 percent, compared to the Dow’s overall gain of 26 percent. That’s a decent amount of outperformance, but a large portion of it came from shares of Hewlett Packard (NYSE:HPQ) nearly doubling this year. Hewlett Packard was the biggest dog coming into 2013, and is no longer a member of the Dow. Let’s take a look at the 10 prospective Dogs of the Dow for 2014. Previous dogs such as Dupont (NYSE:DD) and Johnson & Johnson (NYSE:JNJ) are no longer on the list, as of December 30.

msft jan 3

10. Microsoft (NASDAQ:MSFT)

Dividend Yield: 3.0 percent

Year-to-date Performance: 39.6 percent

csco jan 3

9. Cisco Systems (NASDAQ:CSCO)

Dividend Yield: 3.1 percent

YTD Performance: 13.2 percent

ge jan 3

8. General Electric (NYSE:GE)

Dividend Yield: 3.2 percent

YTD Performance: 32.9 percent

cvx jan 3

7. Chevron (NYSE:CVX)

Dividend Yield: 3.2 percent

YTD Performance: 14.9 percent

mcd jan 3

6. McDonald’s (NYSE:MCD)

Dividend Yield: 3.3 percent

YTD Performance: 10.0 percent

pfe jan 3

5. Pfizer (NYSE:PFE)

Dividend Yield: 3.4 percent

YTD Performance: 22.4 percent

intc jan 3

4. Intel (NASDAQ:INTC)

Dividend Yield: 3.5 percent

YTD Performance: 25.4 percent

mrk jan 3

3. Merck (NYSE:MRK)

Dividend Yield: 3.5 percent

YTD Performance: 22.0 percent

vz jan 3

2. Verizon Communications (NYSE:VZ)

Dividend Yield: 4.3 percent

YTD Performance: 13.6 percent

t jan 3

1. AT&T (NYSE:T)

Dividend Yield: 5.2 percent

YTD Performance: 4.4 percent

More From Wall St. Cheat Sheet:

Follow Eric on Twitter @Mr_Eric_WSCS