Lisa,
Hey, I know what I am talking about:-). Your right it was confusing.
The Dow 5 dividend strategy is based on the DJIA. To determine the 5 stocks for the portfolio, you look at the DJIA and find the 10 highest dividend yielding stocks. Of those 10 stocks, you buy the 5 lowest price stocks in equal dollar amounts. Once you buy them, you hold them for 12 months and a day. After the holding period has expired, you do the screening process again and sell the stocks that do not meet the criteria any longer and buy the ones that do. This strategy has return high double digits returns since the early '70's.
Today, most major wirehouses have a Dow 5 unit investment trust as well as a few investment companies and they usually issue new trust on a monthly basis. Since March is knocking at the door, I just call it the "March Dow 5". Each month these companies do the screening process and then purchase the stock within the first few trading days of each month.
About every three or four months a new company rotates into the Dow 5. My friend's observation was that when a new company rotates in the new stock will trade up higher. And if we pay close enough attention, we might be able to option that stock when it happens for a quick trade.
This movement also causes concern for the strategy; therefore, the Relative Strength Dow 5 as Tom referred to might provide better opportunity. My question for Tom is "what is the screening process to determine the 5 stocks in the RS strategy? Also, is there any track record on it?"
Have a good day.
Later,
lobster |
