The end of 2016 has brought a serious change for the markets and for investors. It turns out that Donald Trump’s infrastructure and pro-growth initiatives have created a serious demand for industrial, infrastructure, consumer and growth stocks. The rise in Treasury yields has been massive, and that has put some pressure on some of the more defensive dividend stocks that have been a safe haven for investors over the past six years.
One thing that still holds true is that interest rates remain low by historical standards. The other truth that has held is that investors still love dividends. And companies that raise dividends year in and year out are even better, particularly if they have a solid growth story that will lead to dividend growth in the years ahead.
At the end of each year, investors look for opportunities and safe harbors to park their money for the year ahead. Investors who love dividends often consider the so-called Dogs of the Dow. This is the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA). While the Dogs are not always properly named, the logic behind this historically was that the higher yields might have implied less interest or lower performance — as a share price rises, its yield comes down on a static basis.
24/7 Wall St. has featured each Dog of the Dow on its own here. The average yield is well above 3%, and most companies are believed to have stable and/or growth on earnings in the years ahead. We have also featured an 11th pick due to the yield being so close to the 10th, and there were four stocks right behind them that also have been included.
For a past comparison, here were the 2016 Dogs of the Dow and the preliminary look at the 2015 Dogs of the Dow as well. Consensus data were taken from Thomson Reuters, and performance metrics and valuation metrics were taken from FINVIZ.
> Yield: 4.49%
Verizon Communications Inc. (NYSE: VZ) was last shown to have a 4.49% yield, even with shares up about 16% so far in 2016. The yield here is high enough above rival Dow dividend payers that it is a lock to be number one, barring any massive change.
Shares of Verizon recently closed at $51.49, with a consensus analyst price target of $52.73 and a 52-week trading range of $43.79 to $56.95.
> Yield: 3.79%
So far, Pfizer Inc. (NYSE: PFE) is ahead of Merck in dividend yields, but that is far from the norm at the end of each year. The issue is that Pfizer shares were up only about 2% so far in 2016, versus almost 19% for Merck. One problem for Pfizer is that it largely has been ignored by investors in the post-election rally as Trump has said he is concerned and not happy about drug price trends in America.
Shares of Pfizer recently closed at $31.70, with a consensus price target of $37.85 and a 52-week range of $28.25 to $37.39.
> Yield: 3.73%
Exxon Mobil generally outyielded by rival Chevron Corp. (NYSE: CVX), but Chevron has gained by over 34% in 2016 versus about 18% for its peer. Chevron also has promised more dividend hikes in the past, and the oil price rise may allow that to continue.
Shares of Chevron last closed at $115.81. The stock has an analyst price target of $116.63 and a 52-week range of $75.33 to $118.20.
4. Cisco Systems
> Yield: 3.46%
Though it may be up 14% so far in 2016, Cisco Systems Inc. (NASDAQ: CSCO) still is the king of dividends in technology, and it also keeps buying back stock as well. Cisco’s position has remained firm as a networking, data center and security leader, and it has raised dividends handily since it began paying out. Cisco even suggested more dividends and buybacks if it gets to repatriate its $60 billion or so in overseas cash.
Cisco shares recently closed at $30.06, with a 52-week range of $22.46 to $31.95 and a consensus price target of $33.11.