Dow Dividend Strategy Historical Returns

Some things you should know about the returns shown in the table below:

The strategies in the table are:

For comparison purposes, the same information is shown for the Dow Jones Industrial Average (DJIA) and the Standard and Poors 500 Average (S&P 500).

    Strategy  Return  Std. Dev.   Best    Worst

BTD 10.1% 19.4% 60.8% -51.5% High10 8.3% 16.2% 48.1% -41.6% High5 7.9% 19.0% 61.2% -48.8% PPP 5.8% 45.0% 183.4% -87.1% MF4 9.4% 25.7% 88.4% -64.5% LY 9.1% 19.7% 60.9% -43.9% 2YR 9.8% 19.2% 52.2% -49.8%
DJIA 7.1% 15.9% 38.3% -33.8% S&P 500 7.1% 16.7% 34.1% -38.5%

Annual returns for the strategies and indexes shown in another table.

From the data in the table above, it is evident that strategies based solely on yield are less desirable as a rule than the others. The High10 strategy does have the advantage of being the least variable and having the worst year with the smallest loss. The High5 strategy does not seem to have any advantages. The MF4 strategy of the Gardners is clever in that it is doing better than the PPP, but due to the 87.1% loss of PPP GM in 2008, it is no longer as attractive as the BTD and 2YR strategies

2008 shows that regardless of one's choice of strategy, there are great dangers, which may not be evident from historical data, in owning stocks during a severe bear market. The annual returns table linked above shows that all of the strategies and the two indices had their worst years by a large margin in the past 45. (The Nasdaq Composite, not shown above, dates back to 1971 and had its worst year ever. The Dow and S&P had their worst years since 1931.) None of the strategies performed as well as the Dow and S&P that year, so no investor sticking with any of the strategies would be pleased by what happened in 2008.

Note that all of the strategies except for the PPP shown have had a higher average returns than the Dow or S&P. Moreover, except for the PPP, until 2008 the worst year with any of the strategies was not as bad as the worst year experienced by the two averages. The larger standard deviations of the strategies (except for High10) is mainly due to the superior returns. In this case, greater variability does not mean greater risk, with the exception of the PPP.

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