Back in 1991 an investor named Michael O'Higgins popularised an investment strategy known as the 'Dogs of the Dow." In essence this theory encapsulates a contrarian mindset while at the same time limiting an investor to owning high quality, lagging, blue-chip stocks.
O'Higgins suggested buying the 10 components of the Dow Jones Industrial Average with the highest dividend yield. According to Wikipedia his thinking was that blue-chip companies don't adjust their dividend to reflect trading conditions as their dividends are maintainable. In contrast, even a blue-chip stock's share price will fluctuate through the business cycle which means a blue-chip with a high yield is likely to be near the bottom of its business cycle and therefore its share price could increase at a faster rate than its low-yielding peers.
The Dow Jones is a grouping of America's 30 largest listed companies; by comparison the ASX equivalent would perhaps be the S&P/ASX 50 (Index: ^AXFL) (ASX: XFL).
Here are 10 stocks within this ASX index which are currently offering amongst the highest trailing gross dividend yields of all 50 constituents.
- Fortescue Metals Group Limited (ASX: FMG): grossed up yield of approximately 10.3%
- Woodside Petroleum Limited (ASX: WPL): grossed up yield of approximately 9%
- Insurance Australia Group Ltd (ASX: IAG): grossed up yield of approximately 8.65%
- National Australia Bank Ltd. (ASX: NAB): grossed up yield of approximately 8.3%
- Australia and New Zealand Banking Group (ASX: ANZ): grossed up yield of approximately 7.85%
- Westpac Banking Corp (ASX: WBC): grossed up yield of approximately 7.8%
- Suncorp Group Ltd (ASX: SUN): grossed up yield of approximately 7.5%
- Coca-Cola Amatil Ltd (ASX: CCL): grossed up yield of approximately 7.35%
- Telstra Corporation Ltd (ASX: TLS): grossed up yield of approximately 6.9%
- ASX Ltd (ASX: ASX): grossed up yield of approximately 6.8%
