The Dogs Lost Their Bite in 2017

The Dogs Lost Their Bite in 2017

This post is an update to Running with the Dogs (of the Dow), originally published on October 11, 2017.


In January 2017, we were looking at several investment options for the proceeds from a house sale. Our primary goal for this investment was to increase our streams of income by investing in dividend stocks.

Since we are American citizens living in Canada, we are limited into what we can invest.

Thanks to the rules of the US and Canada, we cannot hold ANY mutual funds in an account in Canada, except my husband’s RRSP (similar to a 401(k)). We also cannot make new deposits into any US mutual fund.

These restrictions limited our options for the money.

After careful consideration, we elected to move all of the proceeds from the house sale into a Canadian online trading account, through our Canadian bank. The money remained in US dollars.

We invested $300K into the top 10 highest-yielding stocks on the DJIA, as of January 1, 2017. This strategy is known as the Dogs of the Dow.

Using the Dogs of the Dow philosophy, you select the 10 stocks from the DJIA with the highest yield. You invest an equal amount into each stock. At the same time the following year, you again select the 10 stocks from the DJIA with the highest yield and rebalance your portfolio, giving an equal amount to each of the selected 10 stocks.

The Dow at Record Highs

We were very nervous about investing such a large sum into the Dow. Especially since the Dow was trading at what we considered a historically high level – hovering around 20,000.

Of course, this seems laughable now. Thinking the Dow was expensive at 20,000! If only we had known then what we know now about historic highs on the Dow.

Hindsight being 20/20, Dow 20,000 seems pretty cheap.

Although we were nervous, we invested the entire sum of $300K.

We started the year with approximately $30K invested in each of the 2017 Dogs of the Dow. The stocks were:

Cisco Systems
International Business Machines

By the end of 2017, our investment had returned 17.54%. This return includes the trade fees ($9.99 per trade) and reinvested dividends.

Pretty solid return?

The Dow was up approximately 28% in 2017 (including reinvested dividends). The Dogs of the Dow have beaten the overall DJIA in 7 of the past consecutive years. Unfortunately, 2017 breaks this streak.

Note that our return is slightly different from the published returns of the Dogs of the Dow since we did not purchase our stock on January 1. We had to wait until we received all of the proceeds from the sale of the house, in mid-January.

We also cheated a bit.

In early August, we sold approximately $10k of our Boeing stock. Looking back, we should have just left it in the market, as Boeing continued to soar. Lesson learned.

Changes to the Dogs for 2018

Two of the 2017 Dogs have dropped out of the pack for the Dogs of 2018. Boeing and Caterpillar are no longer paying high enough dividends to make the cut. They were the 2 best performers on the 2017 Dogs AND the 2 best performers in the DJIA overall.

Boeing and Caterpillar have been replaced by GE and Procter & Gamble on the 2018 Dogs. We have already sold all of our shares in Boeing and Caterpillar and purchased shares of GE and P&G.

Even though GE cut its dividend a few months ago, it made it into the Dogs. Since I have an emotional attachment to GE,I welcome the chance to add it to our portfolio. Despite its downward trajectory over the last few years, I am cautiously optimistic that new CEO John Flannery can help GE regain some of its former glory.

Readjusting our Strategy

Originally, our plan was to reinvest all earnings back into the Dogs of the Dow for 2018, since our plan was to continue to grow our dividends into a sizable income stream.

However, at the end of 2017, we decided to pocket the gains. Since we are within 2 ½ years of my husband’s early retirement, we decided this was a prudent decision. This money will be put into a CD at our US bank and grow (albeit anemically) until his retirement.

We plan to return to the US in the summer of 2020. Our largest investments (our IRAs) will still be untouchable (without penalty). We hope to convert all of our Canadian assets into US assets, however, if the loonie (Canadian dollar) is not on par or better with the USD, we will have the option to leave the assets in CAD.

In this case, we will need cash in the US and pocketing the gains from the 2017 Dogs of the Dow will help on this front.

And that puppy in the photo, that’s our goldendoodle at 2 months. Pretty cute, eh?

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