Dogs of the Dow Performance in 2021

Dogs of the Dow Performance in 2021. After a strong start, the Dogs of the Dow in 2021 are finishing the year with a whimper. This year is the second year the Dogs of the Dow has performed poorly in a row.

Two Years of Subpar Performance

The Dogs of the Dow 2020 finished the year with a (-12.7%) return much lower than the Dow Jones 30 stocks with a 7.2% return. In contrast, the S&P 500 had a stellar year with around an 18.4% total return. The poor performance in 2020 was partly due to the poor performance of Exxon Mobil (XOM) and Chevron (CVX). Both stocks were impacted by the low oil and natural gas prices.

Dogs of the Dow Performance in 2021 – Year-to-Date

Most investors expected 2021 to be much better. The S&P 500 has met expectations with an approximately 26.7% total return YTD. The Dow 30 has not performed well but is up about 17.5% YTD. On the other hand, the Dogs of the Dow 2021 is up only roughly 11.7% despite a good run until mid-June. The rise of the delta variant caused headwinds, and the Dogs of the Dow 20221 faltered.

Dogs of the Dow 2021 Performance — Source: **Stock Rover***

The best performing Dog of the Dow in 2021 was Chevron (CVX). The stock price rose due to rising oil and natural gas prices. Cisco Systems (CSCO) and Walgreens Boots Alliance (WBA) were other strongly performing stocks. Cisco is performing better in 2021 after a weak 2020 affected by COVID-19. Walgreens Boots stock price is up on optimism about the new CEO’s strategy and the potential spinoff of Boots after a multi-year downtrend.

International Business Machines (IBM), Coca-Cola (KO), 3M (MMM), and Dow (DOW) are all up YTD but are lagging the Dow 30 and the S&P 500.

Verizon Communications (VZ) was the worst-performing Dog of the Dow in 2021. The large telecommunications companies are challenged with the negative sentiment about the growth of cellular and broadband subscribers. Competition is increasing as cable companies enter the space. The AT&T Communications Chief reinforced the point at a recent conference about slower industry growth. However, Verizon is a good dividend stock trading at a low valuation. Furthermore, the company is a blue-chip stock in an oligopoly, the dividend yield is more than 5%, and dividend safety is acceptable. Comparing AT&T vs Verizon, I prefer the latter due to AT&T’s dividend cut. Investors seeking for income may want to look at Verizon.

The two large-cap pharma stocks of Merck (MRK) and Amgen (AMGN) are also performing poorly with negative YTD returns. Merck is challenged with difficulties for its COVID-19 treatment, Molnupiravir, and HIV drug, islatravir. Amgen is facing patent expirations for several key drugs, including Enbrel (rheumatoid arthritis), Prolia (osteoporosis), and Neulasta (infections during chemotherapy). I like Amgen the best of these two pharma stocks due to the strong pipeline. Additionally, the yield is approaching ~3.7% after the most recent dividend increase. Therefore, investors may want to take the opportunity of the poor performance and buy the dip.

Final Thoughts of Dogs of the Dow Performance in 2021

The Dogs of the Dow 2021 is a place to start when looking for income with dividend growth. This group of stocks tends to be large-cap or mega-cap stocks with excellent dividend yields and acceptable dividend safety. Many of the stocks on the list are long-time dividend growth stocks. The performance of the Dogs of the Dow in 2021 has not been great. Most of the stocks in the 2021 list will end up on the 2022 list.

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Chart or Table of the Week

Today I highlight Amgen (AMGN). Amgen is one of the largest biologics therapy companies in the world. The company derives roughly 80% of its revenue from biologics. Amgen has several blockbuster drugs, including Prolia (osteoporosis), Otezla (inflammation), Enbrel (rheumatoid arthritis), Neulasta (oncology/bone), XGEVA (bone), KYPROLIS (cancer), and MIDI (cancer, biosimilar for Avastin). The key patents will expire for some of these in the next few years. However, Amgen has over 20 drugs in its pipeline and acquired Otezla from Celgene. Amgen has also acquired Five Prime Therapeutics, Rodeo Therapeutics, and Teneobio over the past few years to build its pipeline. Amgen’s dividend yield is about 3.7%, and the dividend safety is excellent. The company is now a Dividend Contender. The screenshot below is from Stock Rover*.

Dividend Increases and Reinstatements

I have created a searchable list of dividend increases and reinstatements. I update this list weekly. In addition, you can search for your stocks by company name, ticker, and date.

Dividend Cuts and Suspensions List

I updated my dividend cuts and suspensions list at the end of November 2021. The number of companies on the list has risen to 541. Thus, we are well over 10% of companies that pay dividends, having cut or suspended them since the start of the COVID-19 pandemic.

There were three new companies added to the list this past month. The three companies were Hoegh LNG Partners LP (HMLP), Sturm, Ruger & Company (RGR), and Compass Minerals (CMP).

Market Indices

Dow Jones Industrial Averages (DJIA): 35,972 (+4.03%%)

NASDAQ: 15,631 (+3.61%)

S&P 500: 4,7612 (+3.83%)

Market Valuation

The S&P 500 is trading at a price-to-earnings ratio of 28.6X, and the Schiller P/E Ratio is about 38.3X. These two metrics were down the past three weeks. Note that the long-term means of these two ratios are 15.9X and 16.8X, respectively.

I continue to believe that the market is overvalued at this point. I view anything over 30X as overvalued based on historical data. The S&P 500’s valuation came down as the index companies reported solid earnings for the second consecutive quarter.

S&P 500 PE Ratio History

Shiller PE Ratio History

Stock Market Volatility – CBOE VIX

The CBOE VIX measuring volatility was up ~two points this past week to 30.67. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 index options. It is commonly referred to as the fear index.

Fear & Greed Index

I also track the Fear & Greed Index. The Index is now in Fear at a value of 38. The Index is up 18 points this past week. This Index is a tool to track market sentiment. There are seven indicators in the Index measured on a scale of 0 to 100. The Index is calculated by taking the equally-weighted average of each indicator.

These seven indicators in the Index are Put and Call Options, Junk Bond Demand, Market Momentum, Market Volatility, Stock Price Strength, Stock Price Breadth, and Safe Haven Demand.

Economic News

The US Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) reported 11.0 million job openings as of the last day of October; this number is 431,000 greater than September’s number and the second-highest on record. Industries increasing were accommodation and food services (+254,000), nondurable goods manufacturing (+45,000), and educational services (+42,000). Conversely, job openings decreased in state and local government, excluding education (-115,000), transportation, warehousing, and utilities (-57,000), finance and insurance (-45,000); and arts, entertainment, and recreation (-33,000), finance and insurance (-96,000) were offset by increases in educational services (+54,000).

The US Energy Information Administration reported that US commercial crude oil stockpiles increased by 0.2M barrelsto 432.9M barrels (7% below the five-year average) for the week ending December 3rd. Crude oil refinery inputs averaged 15.8M barrels per day, an increase of 153K barrels per day compared to the previous week’s average. Gasoline inventories increased by 3.9M barrels (5% below the five-year average). Refineries operated at 89.8% of their operable capacity, as gasoline production decreased an average of 9.6M barrels per day. Crude oil imports came in at 6.5M barrels per day.

The US Bureau of Labor Statistics reported the consumer price index rose 0.8% in November; this follows a 0.9% increase in October. The index’s year-over-year rate is up a seasonally adjusted 6.8%, the fastest annual pace since June 1982. Price increases were energy (+3.5%), used car and truck (+2.5%), new vehicles (+1.1%), food (+0.7%), and shelter (+0.5%) all contributing. The energy index has been up ~33.3% over the past 12 months. The gasoline index rose 58.1% over the last year, and fuel oil is also up 59.3% in the past year. The food index has been up 6.1% over the past 12 months. The annual core CPI inflation rate is 4.9% and after a 4.6% reading in October.

Thanks for reading Dogs of the Dow Performance in 2021 – Week in Review!

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