The Daily Dow
Thursday, July 10, 1997
by Robert Sheard

LEXINGTON, KY. (July 10, 1997) -- With the recent volatility among Dow components and a group of stocks clamoring to get into the High Yield Ten, the Foolish Four rankings have been alternating daily this week. Just as a reminder to veteran Fools and a lesson for new readers, let's review exactly how these rankings are generated.

The first step is to identify the ten Dow stocks with the highest dividend yields. But once you've identified those ten, put the yield data away and focus strictly on the stock prices for each of the ten.

The Beating the Dow order (on which the Foolish Four is based) takes those ten stocks and re-sorts them in ascending order by stock price. That is, the lowest-priced stock is #1 and the highest-priced stock is #10.

The Foolish Four method automatically skips the #1 stock (the lowest-priced), and includes the next four stocks on the list (numbers 2 through 5), doubling the weight of the #2 stock.

When there are several stocks gathered around the #10 slot on the high-yield list as there are now, however, the rankings can change quickly and seemingly dramatically. For example, INTERNATIONAL PAPER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %> has alternated with CATERPILLAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> for the tenth and eleventh yield slots recently, but because of International Paper's relatively low share price, when it is in the top ten yielders, it shoots all the way up near the top of the Beating the Dow list, the one ranked by share price. Don't be fooled by that seemingly radical change.

Whatever happens to the daily rankings, however, don't let the quick changes rattle you into making a switch to your portfolio prematurely. These Dow Dividend stocks often recover for many months after they've begun to turn around and price themselves out of the High Yield Ten. If you sell too early to "lock in your gain," you may well be cheating yourself out of months of good gains ahead. Stick to your usual update cycle and don't try to outsmart the strategy; trying to outsmart it is often the best way to kill the effectiveness of the approach. Fool on!

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

Stock  Change   Last
--------------------
T    +   1/4   35.75
GM   +   5/8   56.25
CHV  +   1/8   74.63
MMM  +   3/16  102.88

          Day   Month    Year
        FOOL-4   +0.53%   1.25%   3.45%
        DJIA     +0.57%   2.68%  22.31%
        S&P 500  +0.69%   3.23%  23.36%
        NASDAQ   +0.29%   3.39%  15.48%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  120 3M            83.00    102.88    23.95%
   1/2/97  153 Chevron       65.00     74.63    14.81%
   1/2/97  179 Gen. Motor    55.75     56.25     0.90%
   1/2/97  479 AT&T          41.75     35.75   -14.37%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  120 3M          9960.00  12345.00  $2385.00
   1/2/97  153 Chevron     9945.00  11417.63  $1472.63
   1/2/97  179 Gen. Motor  9979.25  10068.75    $89.50
   1/2/97  479 AT&T       19998.25  17124.25 -$2874.00


                             CASH    $767.60
                            TOTAL  $51723.23