The 2013 Dogs of the Dow … a Real Race for 5th Place

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The Dogs of the Dow are measured out each year simply as the five highest common stock dividend yields among the Dow Jones Industrial Average’s 30 components. We have another list coming called the Pigs of the Dow, which is the measurement of the DJIA’s five worst performers among the 30 components.

Just as we saw in 2012, there were may dividend yields that were so close in the yield screens that the final trading day of the year could be the determining factor for the Dogs of the Dow for 2013. Four of the top five yields are over 4%, but only one was above 5%. We quite literally have a horse race for the fifth place as the yields as of Monday’s close are all between 3.65% to 3.835%. We have included color on the four nearly certain memberd of the Dogs of the Dow and we have shown more basic data on the four runner-up stocks fighting for their place on the list of the Dogs of the Dow for 2013.

Here are what appear to be the certain four components of the five Dogs of the Dow for 2013:

AT&T Inc.‘s (NYSE: T) 5.33% is the top yield of the DJIA and the only 5% yield. At $33.74, the 52-week trading range is $29.02 to $38.58, and the consensus analyst price target is $36.57. AT&T has given its forecast for cap-ex and refinancing in 2013 and well beyond. The dividend increases are now likely to be smaller, and AT&T is busy acquiring spectrum.

Verizon Communications Inc. (NYSE: VZ) is barely in second place at 4.37% for its common stock dividend yield. At $43.54, its 52-week range is $36.80 to $548.77, and the consensus analyst price target is $46.68. Verizon is now starting to significantly lag AT&T in the race for the highest yields. Unfortunately, that may be the case for 2013 as well.

Intel Corp. (NASDAQ: INTC) is the sole technology stock that is now a Dog of the Dow. Its yield is 4.36%, based on the $20.64 share price. The 52-week trading range is $19.23 to $29.27, and the consensus price target is $23.14. Intel has significant challenges ahead. PC sales are sucking wind and Intel is just not even acknowledged as having any presence yet in smartphones and mobile devices.

Merck & Co. Inc. (NYSE: MRK) is the highest yield of the major Big Pharma players at 4.15%, making its place as a Dog of the Dow almost certain. At $41.42, the 52-week range is $36.91 to $48.00, and the consensus price target is $47.79. After a dividend hike in 2012, the position was secured, but we still want to see how Merck will do now that shares have backed off of their 2012 highs by so much.

Here is a list of the four runner-ups for the number five-spot on the Dogs of the Dow for 2013:

E.I. du Pont de Nemours and Co. (NYSE: DD) was a bit of a surprise to see on the list, with a yield of 3.835%. At $44.84, the 52-week range of $41.67 to $53.98 puts this as the lead runner-up, due to a dividend hike and due to poor share performance.

Pfizer Inc. (NYSE: PFE) trades at $25.08 and yields 3.827%. Its 52-week range is $20.75 to $26.09, and the consensus analyst target is $27.74.

Hewlett-Packard Co. (NYSE: HPQ) at $14.01 has a 52-week range of $11.35 to $30.00, and its yield is 3.78%, due to being such a poor performer this year. Analysts have a consensus target of $13.53 on HP, but the stock has fallen so much that we consider this an abandoned company due to its deep troubles. If HP somehow ends up as a Dog of the Dow, the market will say it is a list of dogs for sure.

General Electric Co. (NYSE: GE) has a yield of 3.65%, now that it just hiked its quarterly payout. At $20.82, its 52-week range is $17.72 to $23.18, and the consensus price target is $24.71.

Stay tuned for this to be finalized next week as the formal Dogs of the Dow are named. Also keep see our Pigs of the Dow.

JON C. OGG

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