The Dogs of the Dow is a well-known strategy first published in 1991 by Michael O’Higgins. The plan aims to maximize investment returns by purchasing the 10 highest-yielding dividend stocks in the Dow Jones Industrial Average each year. The highest-yielding stocks are also the lowest-priced stocks in the venerable average, as the lower a stock (or bond) is priced, the higher the attached yield or coupon becomes.
Since the turn of the century, the Dogs of the Dow have outperformed the overall Dow, and the Small Dogs of the Dow, which are the five highest-yielding stocks, even more so. The fact that investors are buying the highest-yielding companies in the venerable index improves the chances for total return gains. From 2000 through the early 2020s, the Dogs strategy posted strong average annual returns, generally beating the Dow by a few percentage points over the entire period. The plan is not foolproof; it struggled during the dot-com bust (early 2000s) and the tech-driven growth surge post-pandemic (2020 to 2021), when growth stocks soared, and value stocks lagged. They also lagged in 2025 as the AI-driven rally continued for the third straight year.
The Dogs often shine in tough markets (like 2008 or 2022), protecting investor capital much better than the broader market by holding stable, high-yielding blue-chip companies. This makes them an excellent choice for Baby Boomers seeking safety and passive income. While the AI/data center rally has pushed stocks and indices to all-time highs, and it could still be a force in 2026, the reality is that the stock market, as measured by the S&P 500, is expensive. It trades at 31 times trailing earnings and 24 times forward earnings. With the midterm elections on the way this year, investors can expect some heightened volatility. So, the Small Dogs may be the perfect play for 2026 for growth and income investors wary of a major sell-off.
Why do we cover the Dogs of the Dow?
Dividend stocks like the Small Dogs of the Dow offer investors a reliable source of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence. The following are the Small Dogs of the Dow.
Verizon
Verizon Communications Inc. (NYSE: VZ | VZ Price Prediction) is an American multinational telecommunications company that continues to offer tremendous value. It trades at 9.13 times its estimated 2026 earnings and pays a 6.72% dividend. Verizon provides a range of communications, technology, information, and entertainment products and services to consumers, businesses, and government entities worldwide.
Verizon’s trailing 12-month interest coverage ratio is 4.6× to 5.0×, providing ample cushion for dividend payments. With a very predictable revenue stream from telecom services, the company has less exposure to commodity cycles. In addition, the large scale helps in financing and absorbing shocks.
It operates in two segments:
- Verizon Consumer Group
- Verizon Business Group
The Consumer segment provides wireless services across the United States through Verizon and TracFone networks, as well as through wholesale and other arrangements. It also provides fixed wireless access (FWA) broadband through its wireless networks and related equipment and devices, such as:
- Smartphones
- Tablets
- Smartwatches and other wireless-enabled connected devices
The segment also offers wireline services in the Mid-Atlantic and northeastern United States through its fiber-optic network, Verizon Fios product portfolio, and copper-based network.
The Business segment provides wireless and wireline communications services and products, including:
- FWA broadband
- Data
- Video and conferencing
- Corporate networking
- Security and managed network
- Local and long-distance voice
Network access services to deliver various IoT services and products to businesses, government customers, and wireless and wireline carriers in the United States and internationally.
TD Cowen has a Buy rating and a $51 price target on the stock.
Chevron
This American multinational energy company, primarily focused on oil and gas, is a safer option for investors looking to position themselves in the energy sector. Chevron Corp. (NYSE: CVX) pays a substantial 4.34% dividend, which it raised by 5% earlier this year. This integrated giant operates energy and chemicals businesses worldwide and offers investors excellent credit ratings (AA), diversified operations, strong margins, and a long history of paying and raising dividends yearly.
Its Upstream segment is involved in the following:
- Exploration, development, production, and transportation of crude oil and natural gas
- Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
- Transportation of crude oil through pipelines, and transportation, storage
- Marketing of natural gas, as well as operating a gas-to-liquids plant
The Downstream segment engages in:
- Refining crude oil into petroleum products
- Marketing crude oil, refined products, and lubricants
- Manufacturing and marketing renewable fuels
- Transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car
- Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives
It also involves cash management, debt financing, insurance operations, real estate, and technology businesses.
Chevron announced in late 2023 that it had entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion. The transaction’s total enterprise value, including debt, is $60 billion. The deal closed last July, providing a solid boost to Chevron’s third-quarter earnings, which exceeded analysts’ expectations.
Wells Fargo has an Overweight rating with a huge $196 target price.
Merck
Merck & Co. Inc. (NYSE: MRK) develops and produces medicines, vaccines, biological therapies, and animal health products. It is not just a healthcare company but a global force in the industry. This healthcare giant is a no-brainer, down over 30% over the past year while paying a solid 3.02% dividend. The company operates through two segments.
The Pharmaceutical segment offers human health pharmaceutical products in:
- Oncology
- Hospital acute care
- Immunology
- Neuroscience
- Virology
- Cardiovascular
- Diabetes
- Vaccine products, such as preventive pediatric, adolescent, and adult vaccines
The Animal Health segment discovers, develops, manufactures, and markets veterinary pharmaceuticals, vaccines, health management solutions and services, as well as digitally connected identification, traceability, and monitoring products.
Merck serves:
- Drug wholesalers
- Retailers
- Hospitals
- Government agencies
- Managed healthcare providers, such as health maintenance organizations
- Pharmacy benefit managers and other institutions
- Physicians
- Physician distributors
- Veterinarians
- Animal producers
Merck’s growth is a result of its efforts and strategic collaborations. The company works with AstraZeneca, Bayer, Eisai, Ridgeback Biotherapeutics, and Gilead Sciences to jointly develop and commercialize long-acting HIV treatments, demonstrating a commitment to innovation and growth.
BMO Capital Markets’ target price for the Outperform-rated shares is a massive $130.
Procter & Gamble
Procter & Gamble Co. (NYSE: PG) was founded more than 185 years ago as a soap-and-candle company. It has paid dividends to shareholders since 1891, raised them for 70 straight years, and currently has a 2.95% dividend yield. The company focuses on providing branded consumer packaged goods worldwide.
Segments include:
- Beauty
- Grooming
- Health Care
- Fabric & Home Care
- Baby
- Feminine & Family Care
The company’s products are sold in approximately 180 countries and territories primarily through mass merchandisers, e-commerce, including social commerce channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores, including airport duty-free stores, high-frequency stores, pharmacies, electronics stores, and professional channels. It also sells directly to individual consumers. It has operations in approximately 70 countries.
Procter & Gamble offers products under such brands as:
- Head & Shoulders
- Herbal Essences
- Pantene
- Rejoice
- Olay,
- Old Spice
- Safeguard
- Secret
- SK-II
- Braun
- Gillette
- Venus
- Crest
- Oral-B
- Ariel
- Downy
- Gain
- Tide
- Always
- Always Discreet
- Tampax
- Bounty
Jefferies has a Buy rating with a $179 target price.
Amgen
Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures, and delivers human therapeutics worldwide. This biotech giant remains a top stock for investors to buy, offering a safer investment with a 2.75% dividend yield to capitalize on the massive growth potential of biosimilars.
Amgen focuses on:
- Inflammation
- Oncology/hematology
- Bone health
- Cardiovascular disease
- Nephrology
- Neuroscience
The company’s products include:
- Enbrel to treat plaque psoriasis, rheumatoid arthritis, and psoriatic arthritis
- Neulasta reduces the chance of infection due to a low white blood cell count in patients with cancer
- Prolia to treat postmenopausal women with osteoporosis
- Xgeva for skeletal-related events prevention
- Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis, and oral ulcers associated with Behcet’s disease
- Aranesp to treat a lower-than-normal number of red blood cells and anemia
- Kyprolis to treat patients with relapsed or refractory multiple myeloma
- Repatha reduces the risks of myocardial infarction, stroke, and coronary revascularization
HSBC has a huge $425 target price and a Buy rating.
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