No strategy works 100% of the time, and that goes for my “Dow Underdogs” Strategy, explains Chuck Carlson, dividend reinvestment specialist and editor of DRIP Investor.
Long-time readers know that the strategy, featured in my book, Winning With the Dow’s Losers, focuses on buying the worst-performing stocks in the Dow Jones Industrial Average in a given 12-month period.
The strategy takes advantage of the idea of “reversion to the mean,” in which high-quality stocks that tend to get oversold have the ability to bounce back.
One Dow Underdog that has my interest for 2023 returns is Intel (INTC), which was down 49% in 2022. Admittedly, I’m still not a fan of Intel for the long term. I think the competitive landscape is quite challenging for the company.
And I think Intel’s plans to build out semiconductor manufacturing capacity in the U.S. has long-term appeal but will likely sap resources in the near term.
Still, the stock, down 49% in 2022, is trading at levels not seen since 2014. The dividend yield, now over 5%, could provide some floor to the stock, and the firm should earn the dividend in 2023.
Do I expect a big rebound in Intel? No. But do I think the stock could muster a gain of 5% in 2023 (a year that promises to be challenging for stocks)? Yes, and when you couple that appreciation with the dividend yield, you could see double-digit total returns for Intel in 2023, which I think will be enough to beat the broad market.
Please note Intel offers a direct-purchase plan. Minimum initial investment is $250, although the company will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $50. The plan administrator is Computershare (www.computershare.com). For enrollment information call (800) 298-0146.
