At the end of every year, myriad strategies are announced for the coming year. With investors continuing to love dividends, one strategy that is reviewed every year is the so-called Dogs of the Dow. Quite simply, this is the five highest yielding stocks in the Dow Jones Industrial Average.
Some measure the Dogs of the Dow as the 10 highest yielding Dow stocks. Due to the drop-off in yields from the fifth to the tenth places (and the fifth place being close to a dead tie), 24/7 Wall St. has decided to focus on the five highest yielding Dow stocks — but six companies reviewed here due to that near-tie for fifth place.
What is interesting about the Dogs of the Dow is that each year this list can change handily. Some stocks are high yield due to major pullbacks in the underlying stock. Other dividend yields are high due to companies and sectors simply having high dividends as a part of a return of capital strategy for their shareholders.
The preliminary list of the Dogs of the Dow is of course subject to change. There are still two weeks of trading before year’s end, albeit the participation will start to be low and the number of trading sessions is few.
24/7 Wall St. has included the most likely Dogs of the Dow, with dividend yields, 2015 performance, forward price-to-earnings (P/E) ratios, trading history and more. Color has also been added on each. Also, here is a look back at our 2015 Dogs of the Dow.
Verizon Communications Inc. (NYSE: VZ) has been a continual member of the Dow’s dogs because of a high dividend, but rival AT&T Inc. (NYSE: T) had an even higher dividend yield, though it was booted off the Dow earlier in 2015. Still, Verizon is now the highest yielding Dow stock, with close to a 5% yield (4.96%). Verizon slowly has raised its dividend all year, and the dividend yield this time a year ago was 4.60%. Verizon shares were last seen up 2.1% in 2015, thanks to its dividend.
Shares of Verizon recently closed at $45.56, with a consensus analyst price target of $50.12 and a 52-week trading range of $38.06 to $50.86. The company has a market cap of $185 billion. Looking ahead to 2016 earnings, Verizon has a multiple of 11.4, compared to the current price.
Another repeat offender on the Dogs of the Dow, Chevron Corp. (NYSE: CVX) has a 4.77% yield at the end of 2015. That compares to a dividend yield of 3.80% this time a year ago. Chevron’s yield is so much higher because of the drop in oil leading its shares lower. Chevron’s shares were last seen down 16% so far in 2015. One additional note is that some investors have begun to worry about oil and gas dividends ahead. Could Chevron’s dividend be at risk?
Chevron shares closed recently at $89.81, with a consensus price target of $98.64 and a 52-week trading range of $69.58 to $114.45. The market cap is $169 billion. Looking ahead to 2016 earnings, Chevron has a multiple of 26 compared to the current price.