Over Half of DJIA Stocks Outyield 30-Year Treasury Bond
2015 is becoming a very interesting year. The bull market is now six years old, we are over three years without a true correction and the Federal Reserve is expected to start raising interest rates. Still, the 30-year Treasury Bond yields only about 2.50%. What is so amazing is that more than half of the 30 Dow Jones Industrial Average (DJIA) stocks are yielding more than the 30-year Treasury now.
24/7 Wall St. routinely looks for dividends and opportunities for investors. The Dow is of course a key index for dividend investors. As of early April, 17 of the 30 Dow stocks yield more than 2.60%. Also three more Dow stocks would yield 2.5% or more if their shares sell off more than a couple percentage points.
In an effort to find the best of these Dow stocks outyielding the so-called Long Bond, 24/7 Wall St. evaluated the Dow stocks by dividend and by implied upside to the Thomson Reuters consensus analyst price target. Color was also added on most of the companies, with trading ranges and recent drivers. While investors generally include the dividend yield for total return upside, we used the raw appreciation versus the current share price alone — and the yield can then go on top of that for a formal calculation of implied total return.
Verizon Communications Inc. (NYSE: VZ), trading at $49.04, has a consensus price target of $51.54 and an implied appreciation expected to be 5.1%. Its dividend yield is 4.5%. Verizon has a 52-week range of $45.09 to $53.66. Rival AT&T was booted out of the Dow recently, and it yields even higher, and Credit Suisse just gave it a huge value call. Deutsche Bank just gave Verizon a big thumbs-up call of its own.
Chevron Corp. (NYSE: CVX) trades at $106.50, and the oil giant’s consensus price target is $113.95, for an implied upside from appreciation of 7%. Its dividend yield is 4.0%. The stock’s 52-week trading range is $98.88 to $135.10, so that consensus target price is more than $20 less than the 52-week high. Short sellers remain aggressive here, as low oil is hurting.
General Electric Co. (NYSE: GE) trades at $27.50, after the 10% post-capital sale pop from last week. GE has a consensus price target of $29.92, giving it an implied appreciation of 8.8%. Its dividend yield is 3.35%. The 52-week range is $23.41 to $28.68. We gave our view on what this GE asset sale really means.
Coca-Cola Co. (NYSE: KO) trades at $40.40 and has a consensus price target of $44.45, implying an expected appreciation of about 10%. Its dividend yield is 3.25%. The beverage giant has a 52-week range of $39.06 to $45.00. Will low oil prices really help drive Coca-Cola demand, or will a strong dollar eat into its growth ahead?
Exxon Mobil Corp. (NYSE: XOM) closed at $85.34 on Monday, and it has a consensus price target of $93.20, leaving an implied appreciation expected to be 9.2%. Its dividend yield is 3.25%, so the slightly higher appreciation and lower dividend than Chevron makes these two a coin toss. Exxon has a 52-week range of $82.68 to $104.76.
Merck & Co. (NYSE: MRK) has a 3.17% dividend yield and Pfizer Inc. (NYSE: PFE) has a 3.19% dividend yield. These two are so close that they seem identical. Still, Merck comes out ahead on implied upside at 12.1%, versus 3.8% for Pfizer. Merck trades at $56.89, its consensus price target is $63.83 and its 52-week range is $52.49 to $63.62.
Procter & Gamble Co. (NYSE: PG) is trading at $83.40, and the consumer products giant has a consensus price target of $91.44. This leaves an implied appreciation of 9.6%, if the pool of analysts is correct. The dividend yield is 3.1% and shares have traded in a 52-week range of $77.29 to $93.89.