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All Contents © 2020The Kiplinger Washington Editors
By Dan Burrows, Contributing Writer
| November 14, 2018
Volatile markets like today’s are a good time to remind long-term investors of the virtues of big, stable dividend stocks like those found in the Dow Jones Industrial Average.
It’s hard to beat blue-chip dividend stocks when it comes to long-term performance. Witness the highest-yielding Dow dividend stocks. Although not every name is necessarily a buy at current levels, each and every one has distinguished itself over the decades.
Note that many of the highest-yielding Dow dividend payers rank among the best equity investments of all time. In several instances, these stocks remain top picks among Wall Street analysts, mutual fund managers and hedge fund managers today.
Big, healthy balance sheets and reliable and rising dividends also tend to make the highest-yielding dividend stocks in the Dow Jones less volatile than the broader market. That can help income investors sleep better at night.
Here are the highest-yielding Dow dividend stocks, with yields ranging from just more than 3% to over 5%.
Data is as of Nov. 12, 2018, unless otherwise noted. Companies are listed by dividend yield, from lowest to highest. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Analysts’ ratings provided by Zacks Investment Research.
Market value: $255.0 billion
Dividend yield: 3.1%
Analysts’ opinion: 5 strong buy, 1 buy, 3 hold, 0 sell, 1 strong sell
Shares in Pfizer (PFE, $44.11) are having a phenomenal year on a price basis, but the pharmaceutical giant really shines as a long-term holding, thanks in part to the health dividend stream. Pfizer has paid uninterrupted dividends since 1980, and hiked its payout every year since 2010.
Pfizer’s stock was up 21% for the year-to-date ended Nov. 12. By comparison, the Standard & Poorís 500-stock index was essentially flat over the same time frame. Hit drugs such as Ibrance, to treat breast cancer, and blood thinner Eliquis – as well as a promising line up of therapies in development – have analysts bullish on the stock.
Pfizer also happens to be a favorite stock pick of active mutual fund managers, and it ranks among the 50 best stocks of all time.
Market value: $212.3 billion
Analysts’ opinion: 7 strong buy, 0 buy, 6 hold, 0 sell, 0 strong sell
Coca-Cola (KO, $49.87) is another defensive Dow dividend payer that’s having an up year in an otherwise lackluster market. Shares in the beverage giant have gained 9.5% for the year-to-date; the blue-chip average to which it belongs was up just 0.4% over the same span.
Few companies can match Coke’s record for quenching investors’ thirst for income. The company has paid a quarterly dividend since 1920, and that dividend has increased annually for the past 55 years.
Analysts are split on whether Coca-Cola is set to outperform the broader market in the shorter-term, but there’s no question it’s been an outstanding holding for long-term investors. Just ask Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B), who first bought KO stock in 1988. Today, Berkshire Hathaway is Coca-Cola’s largest shareholder, with a 9.4% stake in the firm.
Meanwhile, KO has proven to be one of the greatest stocks of all time.
Market value: $231.0 billion
Dividend yield: 3.2%
Analysts’ opinion: 6 strong buy, 0 buy, 10 hold, 0 sell, 1 strong sell
When it comes to dividend growth, Procter & Gamble (PG, $92.70) is about reliable as they come. The consumer products giant has paid uninterrupted dividends since 1891, and has raised its payout for 62 years in a row.
The steady income stream helped P&G create $355 billion in wealth from 1929 to 2016, making it one of the best stocks of all time.
Analysts are split on whether PG stock is good buy at current levels, with an average recommendation skewing toward “Hold.” At Wells Fargo Securities, analysts note that competition remains “as fierce as ever,” making sales growth and market-share gains a challenge. Wells Fargo rates PG stock at “Market Perform” (hold).
Market value: $224.3 billion
Dividend yield: 3.8%
Analysts’ opinion: 10 strong buy, 1 buy, 5 hold, 0 sell, 0 strong sell
Chevron (CVX, $117.39) is an energy titan that produced 2.7 million oil-equivalent barrels per day in 2017, turning that into $9.2 billion in profits. The company’s steady payouts and comparatively generous yield make it one of analysts’ favorite dividend stocks. Indeed, at 3.8%, Chevron’s dividend yield dwarfs that of the S&P 500, which stands at less than 2%.
Analysts at Credit Suisse in early November upgraded their rating on CVX to “Outperform” (buy) from “Neutral” (hold), citing the company’s “superior growth outlook” and “competitive dividend growth,” among other factors.
Wall Street’s pros expect the company to deliver average annual earnings growth 58% for the next five years, according to data from Thomson Reuters.
Market value: $338.0 billion
Dividend yield: 4.06%
Analysts’ opinion: 2 strong buy, 1 buy, 8 hold, 0 sell, 1 strong sell
Shares in Exxon Mobil (XOM, $79.83) were off 6% for the year-to-date ended Nov. 12, pushing the yield on the dividend up above 4%. Although that might be a tempting return for long-term dividend investors, be aware that analysts aren’t as bullish on XOM as they are on competitor Chevron over the next few years. Among analysts polled by Zacks Investment Research, only three rate XOM at “Buy” or better. Chevron, meanwhile, has a total of 11 “Strong Buy” and “Buy” recommendations.
Credit Suisse, which rates shares in Exxon at “Neutral,” notes that the nation’s largest energy company is in the early stages of a multi-year turnaround effort.
Be that as it may, Exxon has been an outstanding long-term holding for generations of income investors. Indeed, it ranks at No. 1 in terms of lifetime wealth creation, with an annualized return of 11.9% from 1926 to 2016.
Market value: $242.6 billion
Dividend yield: 4.12%
Analysts’ opinion: 10 strong buy, 1 buy, 9 hold, 0 sell, 0 strong sell
Verizon (VZ, $58.72) sure makes a lot of lists. The communications services company is one of analysts’ favorite dividend stocks; it’s a top pick for active mutual fund managers and hedge funds; and it also happens to be one of the 50 best stocks of all time.
Shares in Verizon were up 9.7% for the year-to-date through Nov. 12, helped by a market that is increasingly pivoting toward more defensive names. Analysts at Credit Suisse, who rate share at “Outperform,” think Verizon can maintain its market-beating ways, thanks to steady improvements in the company’s core wireless services business, which enjoys a virtual duopoly with rival AT&T (T).
Analysts expect the communications company to deliver average earnings growth of 5.9% a year for the next five years.
Market value: $109.9 billion
Dividend yield: 5.1%
Analysts’ opinion: 4 strong buy, 1 buy, 7 hold, 0 sell, 1 strong sell
International Business Machines (IBM, $120.90) is the Dow stock with the highest dividend yield, but it’s a somewhat dubious distinction. Big Blue’s yield is in excess of 5% only because its shares are sucking wind.
IBM was off almost 22% for the year-to-date through Nov. 12. (The yield on a dividend stock rises as its price falls.) The company hopes that its $34 billion acquisition of software provider Red Hat, announced at the end of October, will change its fortunes in cloud computing, where it has fallen behind rivals such as Amazon.com (AMZN) and Microsoft (MSFT).
For now, investors are taking a wait-and-see approach. To its credit, IBM has been a lion of long-term holding, with a lifetime annualized return of 13.8%.