Under other analysis these stocks could be considered "dogs", or undesirable, as companies often raise their dividend in response to bad news or a decline in share price.
[4] Proponents of the Dogs of the Dow strategy argue that the blue-chip companies that make up the Dow Jones Industrial Average are better able to withstand market and economic downturns and maintain their high dividend yield due to their access to factors such as their established business and brands, access to credit markets, ability to hire top-level management, ability to acquire dynamic companies, etc.
The logic behind this is that a high-dividend yield suggests both that the stock is oversold (or under-valued) and that management believes in its company's prospects and is willing to back that up by paying out a relatively high dividend.
Investors are thereby hoping to benefit from both above-average stock-price gains as well as a relatively high quarterly dividend that can be re-invested to buy additional shares.
Due to the nature of the concept and limited number of stocks involved, the Dogs of the Dow will likely not cover all market sectors.
[1] This suggests that an investor would be best served by viewing this as a longer-term strategy by giving this portfolio of stocks time to recover in case of a rare-but-extreme economic event (e.g., dot-com boom, financial crisis).
[7] Professor Burton Malkiel discusses the Dogs of the Dow in the 1999 version of his book A Random Walk Down Wall Street.
Professor Jeremy Siegel has endorsed the Dogs of the Dow, describing it in The Future for Investors (2005) as “one of the most successful investing strategies of all time.
He suggested that the Dogs strategy is too simple and it neglects factors such as dividend–payout ratio (i.e., how much of the company's profits are devoted to dividends), growth of cash and earnings, and price performance.