What is the Dogs of the Dow: Low Priced 5 screen?
The Dogs of the Dow: Low Priced 5 screen is the concentrated cousin of the classic Dogs of the Dow. It begins the same way — take the Dow Jones Industrial Average, find the 10 members with the highest dividend yield — then adds one more cut: of those ten, keep only the five trading at the lowest share price. Michael O'Higgins proposed this tighter version in Beating the Dow (1991) alongside the ten-stock rule. Over the years it has picked up nicknames — the Small Dogs of the Dow, the Puppies of the Dow, the Flying Five — all pointing at the same thing: a five-name portfolio built to move faster than the full pack.
The core idea
Everything the classic screen believes about dividend yield still holds here. On a roster of durable blue chips, a high yield marks the stocks the market has pushed down too far, and the payout pays you to wait while sentiment mends. The Low Priced 5 layers a second idea on top. Among the Dow names that are already cheap by yield, O'Higgins wanted extra torque, and he used nominal share price as the lever.
The point about price is easy to misread, so it is worth stating plainly. The five are not the lowest-quality or the most distressed of the ten — every one of them already cleared the same high-yield test, so all five sit in the same pool of sturdy Dow companies. A low share price here is a proxy for punchier percentage moves, not a verdict on the business. Historically, a lower-priced stock has tended to swing more in percentage terms than a higher-priced one, so cutting the ten yielders down to the five cheapest by price concentrates the bet on the names most likely to rebound hard if the yield thesis plays out. It is an amplifier bolted onto the yield signal, not a separate quality filter.
What the Low Priced 5 screen looks for
- The stock must be a current member of the Dow Jones Industrial Average.
- Rank all 30 by indicated dividend yield and take the 10 highest — the same starting list as the classic Dogs.
- From those 10, keep the 5 with the lowest share price.
- Hold the five in equal dollar amounts, about 20% of the portfolio each.
Like the parent strategy, it rebalances once a year. You recompute the ten highest yielders, pick the five lowest-priced among them, sell whatever dropped off the list, and reset each survivor to a fifth of the portfolio.
The evidence and why it can work
The Low Priced 5 leans on the same high-yield record that made the classic Dogs famous, then tries to sharpen it. O'Higgins ran simulations over 1973 to 1991 and built the five-stock rule around a long-observed pattern: cheaper-priced stocks tend to post larger percentage swings than pricier ones. Narrow the ten yielders to the five lowest-priced and, when the out-of-favor names recover, each rebound counts for more because the portfolio is half as diversified. The discipline is identical to the parent screen — buy discomfort, sell relief — just applied with more conviction to fewer names.
What to keep in mind
Concentration cuts both ways, and this is where the Low Priced 5 earns its caution. Five equally weighted stocks put 20% of the portfolio behind each name, so a single dividend cut, profit warning, or accounting shock lands with roughly double the force it would in the ten-stock version. O'Higgins was candid that the price of higher expected return is a portfolio far more exposed to one bad holding. Turnover is steeper too — closer to 50% a year against 30% to 40% for the ten-stock list — which lifts trading costs and, in a taxable account, the tax bill. And the price filter is purely mechanical: a falling price raises the yield and lowers the price at the same time, so a company whose dividend is genuinely at risk can drift toward the top of both lists and land in the portfolio.
Sources
Beating the Dow, Michael O'Higgins with John Downes, HarperCollins, 1991.
American Association of Individual Investors (AAII) — Stock Investor Pro screen definition.