(FORTUNE Magazine) – It's been a tough year for the Dogs of the Dow. Investors who follow the strategy that calls for buying the index's ten highest-yielding stocks at the beginning of each year earned an annual average of 15.2% from 1973 through 2004, vs. 11.5% for the Dow. This year, the Dogs are down 5.6% through late November, while the Dow is up 2.5%.

The worst dog of all has been General Motors: In late November the battered carmaker saw its stock hit an 18-year low, and it announced 12 plant closings and upped its job-cut goal to 30,000. Because of the stock's slide, the yield has climbed to 8.5%. Even if the company slices its dividend in half, it seems sure to be near the top of next year's Dogs list.

Is the strategy still valid? "This is the first time I've been worried about it," says Michael O'Higgins, author of Beating the Dow. "The theory is based on the assumption that these companies will survive, and they're just going through a temporary tough time." Yet some Dow companies may have trouble recovering from their current woes. "If we're in a period of destruction," he adds, "not just cyclical ups and downs, you've got a different situation."

Stock Altria Total return* 21.1%

Stock Citigroup Total return* 4.6%

Stock General Electric

Total return* 1.1%

Stock J.P. Morgan Chase

Total return* 0.8%

Stock SBC

Total return* -0.2%

Stock Merck

Total return* -1.6% Stock DuPont

Total return* -9.7%

Stock Pfizer

Total return* -16.7%

Stock Verizon

Total return* -17.9%

Stock General Motors

Total return* -37.3%

Stock Dow Jones Industrials

Total return* 2.5%

* Through 11/17.

SOURCE: BLOOMBERG