Although the ‘Dogs of the Dow’ strategy has a history of outperforming the Dow Jones Industrial Average over the long term, it lagged in 2017, returning just 19% compared with 25% gains for the blue-chip index. Before 2017, the Dogs had generated outsized returns in six of the seven previous years, missing only in 2012.

The ‘Dogs of the Dow’ represents the 10 highest-yielding blue chip companies of the Dow Jones Industrial Average that are out of favor with the markets and thus have higher dividend yields (due to depressed stock prices). High dividend yields suggest that these stocks are in the oversold territory and will rebound faster than any other stock when the fundamentals changes. As such, the strategy combines both the elements of dividend and value investing.

Given this, honing in on stocks that are cheaper than their peers and unlikely to cut dividends could generate above-market returns and lead to juicy yields. In fact, the new tax legislation will act as the biggest catalyst to these stocks, as it would lead to dividend hikes, thereby resulting in higher shareholder returns.

Let’s meet this year’s Dogs of the Dow.

Dogs of the Dow

While eight of the 2017 Dogs of the Dow — Verizon (VZ – Free Report) , International Business Machines (IBM – Free Report) , Pfizer (PFE – Free Report), Exxon Mobil XOM, Chevron CVX, Merck (MRK – Free Report) , Coca-Cola (KO – Free Report) and Cisco Systems (CSCO – Free Report) — are on the list, the astounding performance of Boeing (BA – Free Report) and Caterpillar CAT led to their departure. These two have been replaced by Procter & Gamble PG and General Electric (GE – Free Report). Investors should note that GE is an unusual inclusion in the Dogs given that it cuts its dividend in late 2017.

The Dogs of the Dow could lead this year given that a recovery in oil and natural gas prices could spur outperformance in the two integrated oil giants. Both XOM and CVX are up 3.7% and 2.1%, respectively, to start the year. Additionally, General Electric – the biggest laggard last year – has turned into one of the hottest stock to start the year. The stock logged in the biggest weekly percentage gain since Nov 2016 in the first week of the New Year.