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Maybe youve heard of The Dogs of theDow or The Dow Ten investmentstrategy. However you refer to it, thiscontrarian strategy of investing each yearin the ten highest dividend-yieldingstocks of the Dow Jones IndustrialAverage (DJIA) looks for value byinvesting in the stock of establishedcompanies whose prices may bedepressed. After all, to a contrarianinvestor, bad news can be good news, and

unfavourable developments may createspecial opportunities.

Heres how it works: Of the 30 companiesthat make up the Dow Jones IndustrialAverage, pick the ten that have thehighest yields. Then hang on to them for ayear.

The higher dividend yield generallyreflects a beaten-down share price, whichcan be valuable screen for value in a large-capitalization universe. While a batteredshare price alone wouldnt get you far in a

small-cap portfolio, Dow companiesgenerally lead their industries. They tendto have strong franchises and loyalcustomers and suppliers. As a result, thesestocks have the potential to emerge fromadversity stronger than ever. Because oftheir size, however, that takes time.

Theoretically, theres inherentdiversification here too, because the indexis designed to broadly reflect Americanindustry. And the companies highdividend yields and stability should alsohelp provide a measure of safety during acorrection.

Dogs Of The DowPrice* Dividend Trailing

Company Symbol 12-Jan-10 Rate Yield P/E High Low

AT&T Inc. T $26.99 $1.68 6.2% 13.36 $28.73 $21.44

Verizon Communications VZ $31.77 $1.90 6.0% 16.38 $34.13 $26.10DuPont DD $33.83 $1.64 4.8% 45.11 $35.62 $16.05

Merck MRK $37.58 $1.52 4.0% 9.89 $38.42 $20.05Kraft Foods KFT $29.00 $1.16 4.0% 17.37 $29.84 $20.81

Pfizer PFE $18.86 $0.72 3.8% 15.59 $18.99 $11.62

McDonald's MCD $62.39 $2.20 3.5% 16.12 $64.75 $50.44Chevron Corp. CVX $80.07 $2.72 3.4% 13.02 $81.09 $56.12

Home Depot HD $27.97 $0.90 3.2% 20.87 $29.44 $17.49Johnson & Johnson JNJ $64.55 $1.96 3.0% 14.09 $65.41 $46.25

Procter & Gamble PG $60.82 $1.76 2.9% 14.21 $63.48 $43.93Coca-Cola KO $56.82 $1.64 2.9% 21.04 $59.45 $37.44

Boeing BA $60.45 $1.68 2.8% N/A $62.31 $29.05Caterpillar CAT $61.32 $1.68 2.7% 28.79 $64.42 $21.71

Intel INTC $20.44 $0.56 2.7% 49.85 $21.27 $12.05Travelers Cos TRV $48.67 $1.32 2.7% 9.05 $54.47 $33.07

3M MMM $83.59 $2.04 2.4% 21.00 $84.60 $40.87

Exxon Mobil XOM $69.74 $1.68 2.4% 16.37 $80.50 $61.86General Electric GE $16.61 $0.40 2.4% 15.38 $17.52 $5.72

United Technology UTX $71.29 $1.54 2.2% 16.97 $72.26 $37.40Wal-Mart WMT $54.27 $1.09 2.0% 15.73 $55.09 $46.25

Microsoft MSFT $30.03 $0.52 1.7% 19.50 $31.50 $14.87American Express AXP $41.65 $0.72 1.7% 38.56 $42.48 $9.71

IBM IBM $130.56 $2.20 1.7% 13.46 $132.97 $81.76

Disney DIS $30.69 $0.35 1.1% 17.44 $32.75 $15.14Alcoa AA $15.77 $0.12 0.8% N/A $17.60 $4.97

Hewlett Packard HPQ $51.93 $0.32 0.6% 16.70 $52.95 $25.39JP Morgan Chase JPM $43.06 $0.20 0.5% 27.43 $47.47 $14.96

Bank of America Corp. BAC $16.39 $0.04 0.2% 546.33 $19.10 $2.53Cisco Systems CSCO $24.19 $0.00 0.0% 24.68 $24.89 $13.61

Flying FivePrice* Dividend Trailing

Company Symbol 12-Jan-10 Rate Yield P/E # Shares Total

Pfizer PFE $18.86 $0.72 3.8% 15.59 270 $5,092.20AT&T Inc. T $26.99 $1.68 6.2% 13.36 190 $5,128.10

Home Depot HD $27.97 $0.90 3.2% 20.87 180 $5,034.60

Kraft Foods KFT $29.00 $1.16 4.0% 17.37 170 $4,930.00Verizon Communications VZ $31.77 $1.90 6.0% N/A 160 $5,083.20

Total "Flying Five" $982.40 3.89% $25,268.10

10 Year U.S. Treasury yield 3.38 DJIA 10589.935 Year U.S. Treasury yield 2.63 S&P 500 1136.30

*Intraday Prices

The information contained in this report is o btained from sources believed to be reliable but we ca nnot represent that it is accurate or complete.

CIBC Wo od Gundy, its directors and/or employees may from time to time h ave a position in the securities mentioned.

52 Week

The Flying Five strategy invests in the five lowest-priced stocks among the ten highest-yielding Dow stocks. This strategy recognizes thetendency of lower-priced stocks to move in greater percentage increments than pricier issues. The Flying Five are somewhat riskier thanthe ten Dogs because they offer less diversification. But for Canadian investors seeking to round out a diversified portfolio with a smallbasket of conservative U.S. stocks, the Five are attractive.

PCI Portfolios & ListsJanuary 12, 2010

Dogs of the Dow