Shares of value and strategy of "Dow Dogs" - Investments

Shares of value and strategy of "Dow dogs"

The strategy of forming a portfolio of shares with an emphasis on dividend-yield strategy ( dividend-yield strategy) has become popular for collective investment funds in the US since the early 1990s. This strategy is geared towards investors working with quotes of value & quot; and can be classed as a strategy of gaining benefits from the recognized value of companies ( value investment strategies). The strategy is to select the shares with the greatest potential growth of dividend payments. The slang term for the popular strategy in the group of "equity investments" & quot; - & quot; Dow dogs & quot; ( Dogs of the Dow), which was first given in 1988, as the first results of the analysis of highly dividend shares (in the period 1972-1987) were demonstrated on the equity portfolio from the Dow Jones index, which includes the largest and most mature US companies.

The most famous strategy for dividend targeting is the Dow-10 Investment Strategy. This simplest version of the strategy consists in an annual review of the portfolio at a certain date (for example, December 31) through the inclusion of 10 shares in the portfolio with the greatest dividend yield. It should be noted that even the best dividend yields rarely exceed the level of 4-6% per annum. Traditionally, the fixed level is 2-3%. However, the total profitability of investing in shares with dividend payments over a long time period proves to be quite acceptable, and taking into account the risk factor (stock volatility) makes them investment attractive in comparison with index portfolios. Good portfolio results & quot; Dow strategies & quot; have caused interest in the European market. The European version ( DuBois (1997)), which uses shares listed on the London, Frankfurt, Paris and Amsterdam stock exchanges, has received the name "Euro Dogs". (Euro Dog). Global investors received a recommendation to form portfolios of shares from different markets that show higher than the average global dividend yield.

International panorama

Russian investors with the onset of the financial crisis and the collapse of the stock markets began to take an interest in funds that are oriented toward dividend payments. Many articles in Russian publications are devoted to the analysis of dividend payments. In the US market, funds specializing in shares of "dividend companies" are actively operating; (shares of value). According to analysts from Momingstar, the number of funds with the word "dividend" in the name is approaching 100. According to analysts S & P, the index of "dividend shares" (including companies that have steadily increased dividends for 25 years) in 2007 included 64 issuers. The Fund's Prudental dividend maximiser fund is building a strategy for long-term investments in strong companies (for example, at the end of 2008, shares in SAB Miller, British American Tobacco, Tiger Brands). For three consecutive years, including 2008, the fund provides its shareholders with 14.08% per annum. Since 2003, the Ishares Dow Jones select dividend index fund invests 100 of the most profitable companies in the US, which have not reduced dividend payments over the past five years. In the pre-crisis period, a significant portion of the investment was in the financial sector, as well as in such giants as General Electric, Pfizer, Dow Chemical. The investment strategy for the Franklin rising dividend fund is based on the search for companies , which over the past 10 years of analysis have doubled the volume of dividends and showed an increase in dividend payments for at least eight of the last 10 years. This is a fairly tough selection. The turnover of the fund's assets is only 4% (on average for investment funds, turnover is at the level of 50%). 45% of the total portfolio of the fund falls on shares of 10 companies. The turnover of assets of the investment fund Alpine dynamic dividend fund is very large - 190%, since the fund's strategy is based on buying shares of companies from 20 countries around the world a few days before dividends are paid. A large share of the portfolio is left by the shares of the companies "second" and & quot; third & quot; echelons. An important requirement in the choice of shares - the level of values ​​of the multiplier PIE should be expressed in a single number. Such companies in the crisis period account for 40% of the fund's portfolio.

Traditionally, the indicators of the effectiveness of the portfolios of shares with high dividend yield are the general indicators of return ( raw return), as well as the value of portfolio return with risk adjustment ( returns adjusted for risk) Are the Sharpe and Traynor coefficients. In academic studies, the calculated values ​​of annual returns on different time horizons are compared with the corresponding indexes of stock indices (for example, J. McQueen, K. Shields and S. Horley (1997), analyzing investment strategies " Dow 5 "," Dow 10 "," Dow 15 " and & quot; Dow 30 & quot; through the formation of a portfolio of high-yielding shares with a different number of incoming assets, found that on the 50-year time horizon the strategy of the "Dow Dogs" beats the Dow Jones Industrial Average (DJIA) by 3.06 percentage points. Even a breakdown of five 10-year-old sub-sects does not change the general conclusion - the Dow dogs & quot; show the best result. Only in the crisis year of 2000 (the fall of the stock market due to the bursting of the "Internet bubble"), the strategy ensured a gain of 6%, while the DJIA index fell by 6.2%. In addition, the Dow 5 & quot; beats the Dow 10 strategy, and the Dow 10 & quot; in turn, shows better results than the & quot; Dow 30 & quot; (excess of the total profitability by 3 percentage points on the 50-year time horizon). The only thing that reduces the effectiveness of Dow's strategies is transaction costs, taxation, and the consideration of specific risk factors that should be included in the analysis, as the classical approach to portfolio diversification is disrupted.


In the academic literature, the relationship between dividend payments, dividend yield and stock value of shares (respectively, return on capital gains) is actively discussed. There are supporters of the & quot; 17-shaped & quot; Dependencies that claim that both companies with very high dividend yields and companies that refuse to pay dividends outstrip the companies that are between these extreme positions in terms of the overall investment results. There are studies that prove that strategies focused on dividend payments work well in certain phases of the business cycle and the moods of the stock market players, as well as with the stability of the fast-rate factor as a measure of systematic risk.

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