Dogs of the Dow Beat the Market in 2025 — Here’s the Smarter 4-Stock Play for 2026

Keeping things simple when investing is often best, which is why buying an index fund can be the optimal strategy. Because the market has returned about 10% annually on average for the past 100 years, just buying an exchange-traded fund (ETF) could set an investor up for life.

Yet you can do better than just matching the averages. Michael O’Higgins popularized the Dogs of the Dow strategy in his 1991 book Beating the Dow. It calls for buying the top 10 highest-yielding dividend stocks from the 30 Dow Jones Industrial Average companies and has delivered market-beating returns. You hold onto the stocks for one year, then sell them, and start the process all over again. Wash. Rinse. Repeat.

Because a stock’s yield is often inversely related to its recent performance, you naturally buy value stocks that typically offer lower risk and steady income, a powerful combination for producing stellar returns.

Other variations such as the Dow 5, call for sorting the 10 Dogs by price from lowest to highest. Additional research found that the highest yielding stock — if it was also the lowest priced one — often was a real dog. It underperformed and dragged down the portfolio’s performance. So instead, you would ignore it and just be the remaining four stocks.

Dogs of the Dow 2025 Performance

That’s certainly what happened in 2025. The Dow 5 stocks were:

^{*Not including reinvested dividends.}

As you can see, Verizon was both the highest-yielding stock and the cheapest of the group. While it would have been included in the Dow 5 portfolio, it would have been dropped from the four-stock one, and the portfolio’s performance significantly improved.

That’s not going to be the case every year, and Chevron was not a stellar component either, but it happens often enough that dropping the highest-yield, lowest-price stock still makes sense.

Even so, whether it was the five- or four-stock portfolio, both handily outperformed the DJIA’s returns. It’s also notable that these industry giants trail the headline-grabbing Magnificent 7 by only a few percentage points, but do so with much less volatility while producing superior income.

^{*Includes reinvested dividends.}

Why Verizon Was a Laggard

Verizon posted only minor gains this year due to intense competition in the wireless sector from T-Mobile (NASDAQ:TMUS) and AT&T (NYSE:T), which pressured subscriber growth. It led to net losses in postpaid phone lines in early quarters — such as the 289,000 subscribers lost in Q1 — and elevated churn. The mature U.S. wireless market limited Verizon’s organic expansion as well, with revenue growth remaining flat or modest at around 1% to 2% in key segments.

High capital expenditures to maintain network leadership and compete in 5G and fixed wireless access, combined with a substantial debt load exceeding $126 billion, raised concerns about Verizon’s financial flexibility despite ongoing deleveraging efforts. Investors viewed the stock as “cheap for a reason,” with a low P/E ratio below 9, failing to attract buyers in an environment where it was perceived to lack growth catalysts.

Additionally, weakness in Verizon’s Business segment, including public sector challenges and wholesale revenue declines, offset later gains in consumer wireless and broadband. These headwinds led analysts to describe Verizon as a persistent underperformer, prioritizing its high dividend yield over capital appreciation.

The Dow 5 for 2026

With less than a week to go before the end of the year, the makeup of the Dogs of the Dow is not likely to meaningfully change (there’s also some research to suggest buying the Dogs in late December to capture the full benefit of the “January Effect”).

The current list of Dow 5 stocks is as follows:

The coming year’s Dogs have several new names, but one thing remains constant: Verizon is once again the highest-yielding, lowest-priced stock. That means you would be dropping it if you wanted to follow the four-Dog rule.

As always, past performance is no guarantee of future results, and there have been a number of years where the Dogs of the Dow significantly underperformed the Dow and can even underperform for years at a time. Yet Professor Jeremy Siegel of the Wharton School at the University of Pennsylvania called the Dow Dogs strategy “one of the most successful investing strategies of all time.”

While I might not bet my entire portfolio on it, a four- or five-stock Dogs of the Dow component could comprise an investor’s value segment and earn a solid income stream.