Kevin Simpson, founder and chief investment officer of Capital Wealth Planning, focuses on five stocks in a basket of stocks traditionally used by investors looking for a steady stream of income. The “Dogs of the Dow” is a strategy popularized by investor Michael O’Higgins in the early 1990s and consists of the 10 stocks in the Dow Jones Industrial Average with the highest dividend yields. Dividend yields tend to be inversely correlated with share prices, so the group may be trading at a relatively cheap price and therefore primed for a rebound. These stocks are components of the blue-chip Dow, so they tend to be of high quality. Investors who subscribe to this strategy also have the benefit of owning assets that provide stable cash payouts. Despite underperforming in both 2023 and 2024, the Dogs had a very strong year, rising 17% in 2025, outpacing the broader index’s 13.7% rise over the same period. Speaking about the Bespoke Group, Simpson said the group’s performance this year was its best since 2019. Looking ahead to 2026, Simpson is bullish on three healthcare stocks in his strategy: Amgen, Merck and Johnson & Johnson. The investor told CNBC’s “Worldwide Exchange” on Wednesday morning that the health care industry “will really start taking off at the end of 2025.” Simpson also emphasized that Verizon is a good strategy for equity income investors who primarily focus on high-yield stocks. He added, “For people who value dividends, Verizon always seems to be at the top of that list because it’s a very slow-growing company, which means the stock price is rising slowly. But with a forward multiple of 8.5 percent, the stock is paying almost a 7 percent dividend.” Since the Dogs strategy is yield driven, it also rotates annually. Simpson expects IBM, Cisco and McDonald’s to exit the Dogs this year and be replaced by 2025 Dow laggards Nike, UnitedHealth and Home Depot. Their stock prices are down 19%, 34%, and 11%, respectively, compared to last year. Simpson highlighted newcomer Home Depot as a top candidate within the Dogs in 2026. The investor believes Home Depot could benefit from a cyclical recovery once interest rates begin to normalize.
