Investors can look to the Dow for income.
The Dow Jones Industrial Average is one of the most iconic stock indexes in the world. Consisting of 30 large and established U.S. corporations, many investors look to the Dow for a sign of how publicly traded companies in general are performing. For instance, struggling big oil company ExxonMobil Corp. (ticker: XOM) was recently replaced on the index by Salesforce.com (CRM). However, anyone who is familiar with Wall Street knows not all stocks are created equally. If you’re an income-oriented investor, it’s worth exploring the top Dow dividend payers separately from the broader index itself. Depending on your investment needs, adding some or even all of these names could be more in line with your overall strategy than simply relying on the DJIA on its own. Here are 10 Dow dividend stocks to consider.
The Travelers Companies (TRV)
Travelers is a favorite among dividend investors thanks to the consistent nature of its diversified insurance operations. Its business spans a range of commercial and personal policies, as well as bond insurance and other specialty products. From life insurance to homeowner’s insurance to employer liability policies, this nearly 170-year-old company does it all, and it has the history and expertise to make sure it’s always taking more in via premiums than it’s paying out in claims. Those premiums add up to a steady stream of revenue each quarter, each month and each year. And naturally, they trickle back to shareholders via generous dividends.
Current yield: 3%
Coca-Cola Co. (KO)
One of the biggest brands on the planet, Coca-Cola is a well-run company with consistent revenue. It’s also one of the most consistent dividend payers on Wall Street, marking its 58th consecutive year of dividend increases after a bump to quarterly payouts in February to 41 cents per share. Admittedly, changing consumer tastes have caused KO stock to lag other Dow components in recent years — but while sugary soft drinks may not be a growth business in an era of healthier, fresher foods, they continue to fuel strong baseline sales at Coke and a generous payday for income-oriented investors.
Current yield: 3.3%
Cisco Systems (CSCO)
Communications equipment giant Cisco was one of the first stocks from the dot-com heyday to move away from aggressive growth investments and into a regular payment of dividends and stock buybacks. Critics would argue that is because CSCO became a bit too bloated and has fallen behind some of its peers, but that’s an old argument that may not hold water anymore after various cost-cutting and restructuring efforts to rejuvenate this one-time tech leader. That includes a $1 billion cost-cutting plan announced in 2020 in the wake of the pandemic. On top of this, regular dividend increases in recent years and a massive $15 billion stock buyback plan announced in 2019 should provide a strong foundation for share prices going forward.
Current yield: 3.4%
3M Co. (MMM)
Minnesota-based chemicals and materials giant 3M Co. is a diversified stock that has customers across a host of industries, from transportation and health care to aerospace and consumer products. From products you can buy yourself at the store like Scotch tape and adhesives to specialty chemicals and coatings for manufacturers, 3M offers a wide array of items that help ensure it’s not reliant on a single customer base. This broad portfolio means consistency in revenue year in and year out, across all kinds of economic ups and downs. That’s one of the reasons MMM has been operating for more than a century with great success for its shareholders. It’s not a glamorous business, but long-term dividend investors should consider this industrial conglomerate an attractive buy if you prioritize income and stability above growth potential.
Current yield: 3.6%
JPMorgan Chase & Co. (JPM)
JPMorgan is the largest of big U.S. banks with a mammoth market value of more than $300 billion, annual revenue north of $110 billion and roughly $2.7 trillion in total assets. Particularly in a low interest rate environment that makes it challenging to put capital to work, a scale of this size should be very appealing to investors. Sure, the 2008 financial crisis showed that even big banks can run into trouble, but reforms over the last decade have backstopped the financial system and reduced risk all around. Nothing is ever a sure thing, of course, but keep in mind that JPM weathered the crisis much better than other U.S. banks — including a rapid rebound in its dividend, getting right back to its pre-crisis level of 38 cents per share in 2013 as soon as regulators signed off and subsequently increasing payouts to a current dividend of 90 cents.
Current yield: 3.6%
Verizon Communications (VZ)
Another example of an entrenched megacap stock that’s going nowhere is Dow component Verizon. This telecom giant operates America’s largest wireless network as measured by subscribers, as well as cable TV and fiber-optic internet access for homes and businesses. Communications services like these are built into most budgets as regular expenses and remain consistent in both good times and bad. Furthermore, the regulated nature of big telecom companies in the U.S. along with the incredible capital expenses necessary for deploying a competing network means the chance of competition is slim to none. Consider the fact that T-Mobile US (TMUS) just closed a megamerger with Sprint in part because neither company had the capital on hand to go toe-to-toe with VZ and its peer AT&T (T). There is admittedly not much future growth given market saturation, but bigger is decidedly better — and VZ is on top.
Current yield: 4.2%
Walgreens Boots Alliance (WBA)
Prescription drugs are a must-have in any economic environment, making Walgreens a low-risk investment choice with reliable revenue that fuels consistent dividends. WBA is a global pharmacy powerhouse with around 14,000 locations worldwide, including 9,500 locations in the U.S. under both the flagship Walgreens label as well as Duane Reade stores. It also operates some 400 in-store urgent care clinics, and on top of that thousands of Boots locations across Europe and Thailand. Brick-and-mortar retail isn’t quite what it used to be, but in-person pharmacies are as exposed to the same disruptions as other specialty retailers. Furthermore, WBA is increasingly involved in pharmacy benefit management services, as evidenced by a partnership forged late last year with RxAdvance and managed care company Centene Corp. (CNC). With a massive retail network coupled with long-term deals, Walgreens and its dividend will be around for many years to come.
Current yield: 5.1%
IBM Corp. (IBM)
IBM is not exactly on the cutting edge of the tech sector anymore, and the stock’s price has been almost cut in half compared with its 2013 peak. But there is a lot to be said for the leaner IBM that still has entrenched relationships with enterprise customers, including Fortune 500 companies as well as the federal government, and a more focused operation under its new CEO that included a $900 million restructuring charge in 2020. Sure, IBM has its weaknesses — but many faster-growing tech stocks don’t have any profits to speak of yet, let alone a generous dividend. And while IBM may be down since 2013, the dividend has surged from 95 cents each quarter to $1.63 as of the most recent payout. If you prefer an income-focused tech investment instead of smaller “growth” names on Wall Street, IBM may be worth a look.
Current yield: 5.3%
Chevron Corp. (CVX)
Another big oil stock, Chevron is a case study in how income investments that may not have breakneck growth ahead of them can still offer consistency in dividends thanks to reliable revenue trends from a legacy business model. With a $155 billion market capitalization, Chevron is still one of the largest corporations on the planet — even if it has admittedly slumped from its 2019 highs around $120 a share. While fossil fuels are increasingly in the crosshairs amid attention on carbon emissions and climate change, any clean energy transition won’t happen overnight, and CVX should continue to play an important role in the global economy for many years to come. With 2020 payouts now at $1.29 per share each quarter, up from $1.19 last year and just 72 cents per share in early 2011, there’s reason to be confident that dividends will remain generous even if shares may be volatile in the short term.
Current yield: 6.2%
It’s perhaps fitting that the top dividend payer in the Dow Jones Industrial Average is Dow. This specialty chemicals giant has roots that go back more than 100 years, but the stock itself is a relatively recent addition after its spinoff from DowDuPont after a $130 billion megamerger a few years ago. DOW’s primary subsidiary is the Dow Chemical Co., which makes everything from plastics to agricultural chemicals. Though shares have only traded for less than two years, Dow had a long history of payouts before the merger and its current yield is a sign that history is likely to continue. Chemicals aren’t glamorous, but are always in demand from end users — which all but guarantees consistent revenue regardless of economic trends.
Current yield: 6.2%
The top 10 dividend stocks in the Dow:
— The Travelers Companies (TRV)
— Coca-Cola Co. (KO)
— Cisco Systems (CSCO)
— 3M Co. (MMM)
— JPMorgan Chase & Co. (JPM)
— Verizon Communications (VZ)
— Walgreens Boots Alliance (WBA)
— IBM Corp. (IBM)
— Chevron Corp. (CVX)
— Dow (DOW)
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Update 09/03/20: This story was published at an earlier date and has been updated with new information.