It's time to take a look at the “The dogs of the Dow Jones” Are the best performing stocks on the market Dow Jones Industrial Average (DJ CLUES: ^ DJI) undervalued index, fantastic buys – or have their prices fallen and dividend yields soared for scary reasons?
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Dividend yield |
Total return since the beginning of the year |
Price/earnings ratio (P/E) |
|---|---|---|---|
|
Average among 30 Dow Jones stocks |
1.4% |
38% |
35.0 |
|
VerizonCommunications (NYSE:VZ) |
6.3% |
20% |
18.4 |
|
Chevron (NYSE: CVX) |
4.1% |
11% |
17.4 |
|
Amgen (NASDAQ:AMGN) |
3.3% |
(0%) |
35.5 |
Data found via Finviz.com and YCharts on December 5, 2024.
These three names were among the 10 most profitable Dow Jones stocks at the start of 2024although only Verizon parked in the top 3 at the time.
Only two of last year's Dogs of the Dow outperformed the index itself in 2024. Walgreen Boot Alliance (NASDAQ:WBA) was the highest performing Dow Jones stock in January. The pharmacy and convenience store conglomerate has fallen 66% since then and lost its seat at the table to Dow Industrials.
Generally speaking, the Dow has recently become less dividend-focused. The list of index components did not change from August 2020 to February 2024, but three new names joined the list in the last 10 months. The highest dividend yield of the new entrants group is 0.7% for the paint store giant Sherwin Williams (NYSE:SHW). The lowest dividend of the now former members of the Dow was IntelIt is (NASDAQ:INTC) 1.5% yield – now fully suspended.
Using the SPDR Dow Jones Industrial Average ETF (NYSEMKT:DIA) As a proxy for the Dow Jones, the index's dividend yield has increased from 1.8% to 1.4% since the start of the year.
These recent trends appear unfavorable for the Dogs of the Dow strategy. Will the top three producers on the current list be able to turn the situation around in 2025?
Verizon still pays generous dividends, as do most big names in large-scale telecoms. With modest revenue growth, massive hardware installation and maintenance costs, and $150 billion in long-term debt, it's not surprising to see Verizon sharing a lot of excess cash profits with its shareholders. Large dividends are quickly becoming the main attraction for investors as telecom giants mature.
The lion's share of Verizon's recent returns has indeed been generated by dividend distributions. The stock's total return of 20% in 2024 drops to 13% when considering price gains alone.
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