Thoughts on the Dogs of the Dow strategy?

So you’re investing in 1/3 of the Dow?

Seems pretty random

Dogs of the Dow relies on the premise that blue-chip companies do not alter their dividend to reflect trading conditions and, therefore, the dividend is a measure of the average worth of the company. In contrast, the stock price does fluctuate throughout the business cycle. This should mean that companies with a high dividend relative to stock price are near the bottom of their business cycle, so their stock price likely would increase faster than companies with low dividend yields. In this scenario, an investor reinvesting in high-dividend-yielding companies annually should outperform the overall market.

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This should mean that companies with a high dividend relative to stock price are near the bottom of their business cycle

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an investor reinvesting in high-dividend-yielding companies annually should outperform the overall market.

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"Should" means nothing in markets without data to back it up, and for that matter, opinions on strategies should be based solely on strategy results (actual returns, backtest results, and forward testing results).

TL;DR: the Dogs of the Dow strategy is just a higher risk-higher reward strategy than the benchmark. It does not produce excess returns.

Luckily, I am a master at the Googles and found this guy's 14 year backtest of the strategy on Quantopian. As you can see, the DotD algo produced a 149.73% return over the period while the DJIA produced a 109.19% return. However, if you look at risk metrics, you'll notice alpha is just 0.03. If you aren't aware, alpha is a measure of rewards in excess of risk. Being barely above zero, the DotD's alpha means that the strategy's outperformance is due to it being a higher risk-higher reward strategy than the benchmark, not a better risk-reward strategy. In addition, the Sharpe ratio of 0.41 is low; a good risk-adjusted return should have a Sharpe ratio of around 1 or better. Likewise, the Sortino ratio should be higher than 0.55; one source indicates a Sortino ratio of 2 or better, but I'm not certain about that because I'm unfamiliar with the Sortino ratio.

My Coca Cola stock has returned 10%+ in gains and dividends since I bought it last year.

FWIW