Following this strategy is simple: choose the 10 FTSE 100 shares with the highest yield, invest equal amounts in all 10 and hold for a year.
Over the past 18 years, the Dogs investment strategy has produced spectacular performance.
For example, the 10 Dogs of 2009 made an average return of 86.5% after one year compared with 31.9% for the FTSE 100 index (dividends reinvested).
Last year, it outperformed the FTSE 100 index again, beating the benchmark in 13 of the past 18 years.>
The average annual return, including dividends, for our Dogs over the 18 years of the portfolio is a healthy 13% a year, compared with 7% for the index.
However, let’s not be too cocky, as 2018’s returns were disappointing.
Overall, the portfolio lost 4.4% based on share price performance alone, although this was ahead of the 6.3% loss suffered by the index. On a total return basis taking account of dividend payments, the Dogs scraped into positive territory with a 2.2% return, compared with a negative 2.3% for the index. So it could have been worse, but it was hardly a pedigree year.
Changes in the 2019 line-up
It’s time to reset our Dogs of the Footsie portfolio, selecting the 10 highest-yielding shares of the FTSE 100 index. Around half of 2018’s portfolio is carried over on to this year’s list, but there are also new names to get acquainted with.
Our portfolio spans a diverse spread of sectors, from mining to telecoms, financial services companies to retailers, and advertising agencies to tobacco firms.
Please note that the investment of dividend payments is not included in the current value (notional £1,000 invested in each) as listed below. The current value below does not allow for 0.5 per cent stamp duty reserve tax, nor for Interactive Investor's £10 dealing charge in each share (£5 for frequent traders).
Investors can follow this portfolio or set a Dogs portfolio up themselves at any time. The first step is to find the 10 highest yielding shares of the FTSE 100 index. You can do this here: www.iii.co.uk/markets/?type=stockfilter.
Check that potential members have not already warned that their dividend will be cut. When you have identified the 10 shares, split your chosen investment level between all 10 shares equally and hold all of them for one year.