Great Dividends: Meet the Preliminary 2015 Dogs of the Dow

December 23, 2014 by Jon C. Ogg

It is coming up on the end of the year, and the stock market is nearing its sixth year of the bull market. With investors loving dividends so much, 24/7 always tries to take a look at what the Dogs of the Dow will look like for the year ahead. Quite simply, these are the 10 highest Dow Jones Industrial Average (DJIA) dividend stocks.

The Dogs of the Dow is a widely followed group of stocks. It may sound like the “dog” is simply a measure of poor performance. Sometimes that is the case, but that is often coincidental — and/or why the new members in the Dogs of the Dow have such high yields.

What 24/7 Wall St. noticed the most is that there likely will be many big changes in the Dogs of the Dow for 2015, versus the preliminary Dogs of 2014. The closing prices are as of Monday, December 22, 2014, and this basically narrows these stocks down to five trading sessions left in 2014. Also, those five trading sessions are generally considered to be light in volume and very light in attendance from major traders.

AT&T and Verizon are yet again the two highest yields by far in the Dogs of the Dow, and they are likely to be followed by Chevron and McDonald’s. Pfizer and GE are fighting it out for that key fifth highest dividend yield spot. Companies like DuPont, Cisco, Microsoft and Intel look as though they will not be among the 10 Dogs for 2015 as they were a year ago.

24/7 Wall St. has included brief color on each of the likely Dogs of the Dow for 2015. We have also included pricing, share performance in 2014, the 52-week trading range, an earnings valuation and the consensus analyst price target for each.

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AT&T Inc. (NYSE: T) is yet again the top Dog in DJIA dividends, with just over a 5.40% yield. AT&T just hiked its dividend for 2015 as well, despite weak trends in the wireless sector. Will the proposed acquisition of DirecTV matter? AT&T shares closed Monday up 1%, at $33.85 in a 52-week trading range of $31.74 to $37.48. The company’s performance year-to-date is also up over 1% at current prices. The stock has a consensus analyst price target of $34.90, and the market cap is $175 billion. It has a forward price-to-earnings (P/E) ratio of 13.

Verizon Communications Inc. (NYSE: VZ) is again running in the number-two spot of the Dow’s Dogs, with a 4.60% yield. The yield this time a year ago was just under 4.30%. Verizon also has a wireless price war to content with. Verizon saw its shares close Monday up 1% to $47.51, and it has a similar performance year-to-date, up 1%, at the current price. The consensus analyst price target is $52.50 and the 52-week trading range is $45.09 to $53.66. Verizon has a market cap of $197 billion, and its forward P/E ratio is over 12.

Chevron Corp. (NYSE: CVX) has been the victim of the oil patch in 2014. As prices have fallen, the weakness in oil stocks has pushed the yield higher — as did Chevron’s dividend hike earlier this year. Its dividend is now 3.80%. Chevron saw its shares fall just under 1% to close out Monday’s trading at $112.03. This company has a market cap of $211 billion. Out of this group, it has the worst year-to-date performance, down 7%, due to falling gas prices since the summer. The stock has a consensus price target of $122.74 and a 52-week trading range of $100.15 to $135.10. The forward P/E ratio is 15.

McDonald’s Corp. (NYSE: MCD) had an uneventful year on the surface, as its year-to-date performance was nearly flat from Monday’s close at $93.89. Still, it was one of the worst DJIA stocks of 2014, and whether the new menu changes will make for a turnaround remains unknown. McDonald’s still is the face of low-wage labor fights each month. Also, young adults just don’t like McDonald’s the same way prior generations did. The yield of 3.60% likely solidifies its number-four slot in the Dogs of the Dow for 2015. The 52-week range fluctuated 18% from $87.62 to $103.78, but the company has little to show for it. The consensus analyst price target is $95.99, and the market cap is $91 billion. The forward P/E ratio is 17.

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Pfizer Inc. (NYSE: PFE) may have bounced heavily from its 52-week low in 2014, and it may have restructured handily to the point that it is considered a tax inversion. Its dividend is currently just under 3.50%, almost a half-point higher than the yield of Big Pharma rival Merck. Pfizer and GE are fighting for the fifth spot in the Dogs of the Dow for 2015. Pfizer shares remained flat for Monday’s close at $32.09, but their performance year-to-date was one of the highest of the group, up over 8%. The company has a market cap of $202 billion and a forward P/E ratio of 14. The stock has a consensus price target of $34.42 and a 52-week trading range of $27.51 to $33.12.

General Electric Co. (NYSE: GE) recently lifted its dividend yet again, and it is now firmly in the Dogs of the Dow race. With some investors only looking at the top five Dogs, its 3.42% yield is just behind Pfizer’s 3.49% yield. With this hike taking place in January, the $0.22 prior dividend rising to $0.23 will generate a yield of 3.57%, so perhaps GE will take Pfizer’s place as fifth rather than sixth place in the Dogs of the Dow. GE’s close on Monday of $25.71 puts its performance year-to-date down about 5%, for the fourth worst-performing DJIA stock of 2014 (so far). The consensus price target is $29.08, and shares have traded in a 52-week range of $23.69 to $28.09. GE has a market cap of $258 billion and a forward P/E ratio of 14.

Merck & Co. Inc. (NYSE: MRK) is making a return to the Dogs of the Dow, albeit much lower on the list due to a big gain in 2014 (shares are up almost $9 from a year ago). Its 3.05% yield is currently just ahead of Caterpillar in the Dogs of the Dow dividend yield chase. Merck shares closed Monday down 1% to $58.96, versus a 52-week range of $49.23 to $62.20. The company has a forward P/E ratio of over 16, and also its performance year-to-date was up 21%. Merck has a consensus price target of $63.92 and a market cap of $168 billion.

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Caterpillar Inc. (NYSE: CAT) is currently a hair under Merck in yield at 3.03%, and barely above Exxon Mobil’s 2.96% yield. It is likely that Caterpillar will make the Dogs of the Dow for 2015, just as its position in the 2014 Dogs was up for grabs until the very last day of 2013. Caterpillar saw its share price close Monday up less than 1% at $92.32. This is similar to its steady growth year-to-date of 4%. The stock has a consensus price target of $106.43. The 52-week trading range is $85.88 to $111.46. The market cap is nearly $56 billion. Caterpillar’s forward P/E ratio is 13.

Exxon Mobil Corp. (NYSE: XOM) has a yield of 2.96%. This may greatly lag Chevron’s 3.82% yield, but Exxon likely can keep increasing its dividend to try to catch up to Chevron, even if energy prices remain low. Exxon is also buying back lots of stock each year. Its candidacy for the Dogs in 2015 seems set, but its formal rank remains up for grabs. Exxon shares closed Monday at $93.33, and its 5.1% drop so far in 2014 makes it the third worst DJIA stock for 2014 as of now. Exxon has by far the largest market cap of the group, at $395 billion. The consensus price target is $97.68, and the 52-week trading range is $86.19 to $104.76. Its forward P/E ratio is 16.

Coca-Cola Co. (NYSE: KO) was a wild card for the 2014 Dogs of the Dow, and its 2.88% yield is literally only 0.10% higher than Procter & Gamble and only 0.15% higher than the yield of IBM. That does not ensure that Coca-Cola will be in the 10th spot in the Dogs of the Dow for 2015, but that is where things were as of Monday’s close. Coke’s shares were up less than 1% at $42.35, and the performance was up over 5% at current prices. Still, Coca-Cola has a high forward P/E ratio of over 20 and a consensus analyst price target of $43.91. Its 52-week trading range is $36.89 to $45.00, and it has a market cap of $185 billion.

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If readers want to see historical Dogs of the Dow data for fixed and preliminary members, we have data back to 2007 on our Dogs of the Dow search page.