The Dogs of the Dow is a well-known investment strategy first published in 1991 by Michael Higgins. It seeks to maximize the yield of investments by buying the 10 highest-paying dividend stocks available from the Dow Jones industrial average each year. The highest-yielding stocks are also the lowest-priced stocks in the venerable index, as the lower a stock (or bond) goes in price, the higher the attached yield or coupon becomes.
We decided to see how this year’s group is fairing, as we have crossed the halfway point for 2023. While the Dogs of the Dow have changed since the start of the year, they also have become a great contrarian idea in a market that is very overbought in an economy that could really be suffering six months from now. With the Nasdaq up over 38% and the S&P 500 up close to 19%, investors trying to play catch-up on the big tech giants that have been driving the market rally may get hurt trying to pick up nickels in front of a bulldozer, as the lion’s share of the big short-term money likely has already been made.
Here are the current five highest-yielding Dogs of the Dow listed in order of the highest yield. While all are rated Buy across Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This top telecommunications stock offers tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.
Verizon’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.
The company also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
Verizon and the other big telecom giants have been mauled this week over concerns over lead phone lines. While this could keep a lid on the stock in the near term, many feel it is the best buying opportunity in years.
Investors receive a 7.67% dividend. Oppenheimer has a $46 price objective on the shares, while the consensus target is $43.48. Verizon Communications stock closed Tuesday’s trading session at $32.27, which was up close to 3% for the day.
This huge drugstore chain operator is a safe retail play for investors looking to add health care now, and it trades at a cheap 7.5 times 2023 earnings expectations. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.
The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.
The Retail Pharmacy International segment sells prescription drugs and health and wellness, beauty, personal care and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as online and an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada in the United Kingdom, Thailand, Norway, the Netherlands, Mexico and elsewhere, and 550 optical practices, including 165 on a franchise basis.
The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.
Shareholders receive a 6.46% dividend. Cowen has set a $41 target price, and Walgreens Boots Alliance stock has a $33.87 consensus target. The shares closed at $29.58 on Tuesday.
This top company could really benefit from continued economic pick-up, and the shares are down big this year. 3M Co. (NYSE: MMM) operates as a diversified technology company worldwide. It operates through the following four segments.
The Safety and Industrial segment offers industrial abrasives and finishing for metalworking applications; auto body repair solutions; closure systems for personal hygiene products, masking and packaging materials; electrical products and materials for construction and maintenance, power distribution and electrical original equipment manufacturers; structural adhesives and tapes; respiratory, hearing, eye and fall protection solutions; and natural and color-coated mineral granules for shingles.
The Transportation and Electronics segment provides ceramic solutions; attachment tapes, films, sound and temperature management for transportation vehicles; premium large format graphic films for advertising and fleet signage; light management films and electronics assembly solutions; packaging and interconnection solutions; and reflective signage for highway and vehicle safety.
The Health Care segment offers food safety indicator solutions; health care procedure coding and reimbursement software; skin, wound care and infection prevention products and solutions; dentistry and orthodontic solutions; and filtration and purification systems.
The Consumer segment provides consumer bandages, braces, supports and consumer respirators; cleaning products for the home; retail abrasives, paint accessories, car care DIY products, picture hanging and consumer air quality solutions; and stationery products.
3M stock comes with a 5.87% dividend. The $114 D.A. Davidson target price compares with a consensus target of $99.08 and Tuesday’s $103.01 closing share price.
This stock certainly offers investors growth and income potential. Dow Inc. (NYSE: DOW) is a leading materials science company and was formed from the merger of Dow and DuPont in 2017 and the subsequent spin-off 2019. The company is organized into three principal divisions: Performance Materials & Coatings (23% of EBITDA), Industrial Intermediates & Infrastructure (27%) and Packaging & Specialty Plastics (51%).
The company’s segments include Agricultural Sciences, which is engaged in providing crop protection and seed/plant biotechnology products and technologies, urban pest management solutions and healthy oils. The Consumer Solutions segment consists of Consumer Care, Dow Automotive Systems, Dow Electronic Materials and Consumer Solutions-Silicones businesses.
The Infrastructure Solutions segment consists of Dow Building & Construction, Dow Coating Materials, Energy & Water Solutions, Performance Monomers and Infrastructure Solutions-Silicones businesses. Performance Materials & Chemicals consists of Chlor-Alkali and Vinyl, Industrial Solutions and Polyurethanes businesses. The Performance Plastics unit consists of Dow Elastomers, Dow Electrical and Telecommunications, Dow Packaging and Specialty Plastics, Energy and Hydrocarbons businesses.
The dividend yield is 5.29%. The Piper Sandler price objective for Dow stock is $68. The $56.60 consensus target is closer to Tuesday’s close at $52.98.
This blue chip technology giant still offers investors an incredibly solid entry point, a massive dividend and a conservative way to play the artificial intelligence (AI) explosion. International Business Machines Corp. (NYSE: IBM) provides integrated solutions and services worldwide. The company operates through four business segments.
The Software segment offers hybrid cloud platform and software solutions, such as Red Hat (an enterprise open-source solutions); software for business automation, AIOps and management, integration and application servers; data and artificial intelligence solutions; and security software and services for threat, data and identity. This segment also provides transaction processing software that supports clients’ mission-critical and on-premise workloads in banking, airlines and retail industries.
The Consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system integration services; technology consulting services; and application and cloud platform services.
The Infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients’ mission-critical and regulated workloads, and it supports services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment. The Financing segment offers lease, installment payment, loan financing, and short-term working capital financing services.
An AI and supercomputer pioneer with Watson, IBM moved away from past projects in 2022 but has vowed to invest $20 billion over the next decade to develop and manufacture semiconductors, mainframe computers and technology used for AI and quantum computing.
IBM stock investors receive a 4.95% dividend. The BofA Securities price target is $152. The lower consensus target is $141.37. Tuesday’s closing print was $135.36.
Again, it is important to remember that the rampage the market has been on this year comes right into the headwind of a 5% increase in the federal funds rate over the past 16 months, and there is a good chance it will be even higher by the end of the year. The tricky part for investors is knowing when the increase in rates will put a dent in the economy. While that remains unknown, history says it will indeed happen, so moving to these top companies with big and dependable dividends may be a solid move now.
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