The 'Dogs of the Dow' didn't have the same bark in 2012.

After two consecutive years of beating the market, one of Wall Street's classic strategies didn't prove so fortuitous last year, sparking questions over whether the approach will rebound in 2013.

The strategy holds that investors should start the year by purchasing the 10 highest-yielding components of the Dow. The aim is to acquire more dividendincome and hope the past year's laggards return with a vengeance. Excluding dividend increases, yields rise when stock prices fall, underscoring the core of the Dogs strategy.

Investors who used this strategy in 2010 and 2011 were rewarded, as dividend-paying stocks prospered during those volatile years. But the Dogs stocks rose 5.7% last year, excluding dividend income, falling short of the 7.3% increase for all 30 Dow stocks.

Making matters worse, the 14% gain from the 20 non-Dog stocks, excluding dividends, more than doubled that of the Dogs.

Including dividend income, the Dogs had a total return of 9.8% in 2012, compared with a 10% total return for the wider Dow, according to market-research firm Bespoke Investment Group.

Dividend-paying stocks lagged behind as the year came to a close amid fears of potential tax hikes in early 2013 spurred by the so-calledfiscal cliff.

In 2012, the 100 stocks in the Standard & Poor's 500-stock index with the highest dividend yields gained 7.4% before dividend payouts, according to Birinyi Associates. Meanwhile, the S&P 500 as a whole rose 13%, and the 106 stocks that don't pay dividends rose 19%.

'Sentiment is somewhat negative right now, but once that cloud gets lifted, that's when you'll see these stocks rise again,' says Michael Foss, a partner and portfolio manager for Baltimore-based Brown Advisory, which oversees about $30 billion in assets.

General Electric Co. was the best-performing Dog stock last year, growling to a 17% gain. Fellow Dogs Pfizer Inc. and AT&T Inc. were also big performers, rising 16% and 13%, respectively.

But what really hurt the strategy was the fact that the Dow's top performers last year were non-Dogs. Bank of America topped the blue-chip performers, rising 107%, and Home Depot jumped 47%.

The Dogs will feature two new companies this year: Hewlett-Packard Inc. and McDonald's Corp. They replace Kraft Foods Group Inc., which was booted from the Dow last year, and Procter & Gamble.

Money manager Michael O'Higgins is credited with creating the Dogs approach in the early 1990s.

'The strategy forces you to buy companies when they're down and out,' says Mr. O'Higgins, who runs Florida-based O'Higgins Asset Management, which manages a little under $100 million. 'Anything that forces you to buy quality stocks when they've been knocked around is helpful.'

Mr. O'Higgins has tweaked his approach in recent years to what he calls the 'Dogs of the World,' which tracks global stock indexes. His method involves buying global stock indexes and exchange-traded funds that track some of the 'cheapest countries' based on his own valuations.

The Dogs aren't always a loyal moneymaker. Cumulatively, from 2001 through 2010, the Dogs yielded a smaller return than investing in all 30 Dow components, including dividends, according to Bespoke.

Still, many investors see strategies based on dividend-paying stocks returning to favor in 2013. With the Federal Reserve keeping interest rates low for the foreseeable future, analysts suggest dividend-paying stocks look more attractive than Treasurys in this yield-starved environment.

'In a 0% interest-rate environment, 5% dividend yields will still be attractive to investors seeking income,' says Oliver Pursche, president of Gary Goldberg Financial Services.