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small dogs of the dow 2012 - dividendincomestocks.com
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Jan 262012
 

It’s 2012, and I want to present the 2012 Dogs of the Dow. The Dogs are the 10 stocks with the highest dividend yield in the Dow Jones Industrial Average. Many investment professionals recommend investing in the Dogs, and I do as well. Investing in the Dogs is a solid way based on past performance to outperform the market average. Buy Dogs that are in the top 10, and if they fall out of the top 10 in 2013, then sell those stocks and buy new Dogs the following year. Most of the Dogs are solid stocks that have fallen a little bit out of favor, so they have room to grow.

In 2011, the Dogs returned 17%, including dividends. This was better than the Dow’s return of 8%, and the S&P’s of just over 2%.

In 2010, the Dogs returned 21%, the Dow returned 14% and the S&P returned 15%.
All in all, the Dogs have surpassed the S&P 500 24 of the last 39 years.
So although the Dogs do not always beat the indexes, they have over 60% of the time. Betting on high yielding stocks is what I’m all about.

2012 Dogs of the Dow List

2012 Dogs of the Dow The 2012 Dogs Of The Dow

Many of the 2012 Dogs of the Dow have underperformed over the past 5 years. Check future posts as I will break down each Dog and give a recommendation on each to buy or sell. You may also look at my previous posts like How To Calculate Dividend Yield.
Dog of the Dow #1, ATT (T)
Dog of the Dow #2, Verizon (VZ)
Dog of the Dow #3, Merck (MRK)
Dog of the Dow #4, Pfizer (PFE)
Dog of the Dow #5, General Electric (GE)
Dog of the Dow #6, DuPont (DD)
Dog of the Dow #7, Johnson & Johnson (JNJ)
Disclosure: I am long MRK. I do not plan to purchase any of the other Dogs within 72 hours of this post.



 

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Jan 252012
 

merck Dog of the Dow #3, Merck (MRK)The #3 dog of the dow for 2012 is Merck, (Ticker symbol MRK).  Merck is a 120 billion dollar cap company, one of the largest in the world in the Pharmaceutical business. Merck is a very old company, established back in 1891.  During World War I, it was confiscated as an assets (as most German assets were) and was then brought back as a private company after.

The company has manufactured, invented and sold drugs since the start of the company. Merck also publishes “The Merck Manuals” which are a series of medical reference books.  These include the top selling medical textbook, “Merck Manual of Diagnosis and Therapy”.

MRK has had some issues with their stocks over the past 8 years.  Once a stock that was riding around 45 dollars a share, it took a huge hit towards the end of 2004 when the company was forced to pull Vioxx off of the shelves.  The stock went down to below 26 dollars a share after the loss of the drug and imposing litigation. Merck’s stock rebounded all the way over 60 dollars a share early in 2008 before the great recession.  After May 2008, the stock never saw 40 dollars again.  Merck recently increased their dividend from 38 cents a share a quarter to 42 cents a share a quarter. Its current dividend yield is 4.29%.  The increase in dividend has boosted the stock from a 34 dollar a share stock to nearly that unreachable 40 dollars a share.  Also the dark cloud over drug stocks has started to clear and the public has started to favor them once again.

MRK earnings were $1.46 a share for 2010, and are projected to be around $3.76 for 2011 and $3.84 for 2012. This equates to an average P/E ratio of about 10.50.

My unofficial estimate is that MRK does not have the income gains to continue the growth they have shown here at the end of 2011 and early 2012, and the stock will stall around $42 a share, and may actually lose value during the year.  MRK will finish 2012 at around $38 a share.

Go back to my original post for 2012 Dogs of the Dow. 2012 Dogs of the Dow

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