The Dogs of the Dow is a well-known strategy first published in 1991 by Michael Higgins. The strategy 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 average, as the lower a stock (or bond) goes in price, the higher the attached yield or coupon becomes.

With the Nasdaq up 43%  and the S&P 500 up 24.2%, the Dow Jones industrials came in a distant third, up 13% in 2023. Investors trying to play catch-up on the big tech giants that drove the market rally in 2023 may get caught trying to pick up nickels in front of a bulldozer as the lion’s share of the big money has been made.

Here are the current five highest-yielding Dogs of the Dow for 2024 listed in order of the highest yield. With massive total return potential and the highest yields in the venerable Dow Jones industrials, investors looking for solid passive income and share price appreciation should buy these stocks promptly.

Walgreens Boots Alliance

A Walgreens store in Arizona.

This huge drugstore chain is a safe retail play for investors looking to add health care now, trades at a very cheap 7.85 times 2024 earnings, and pays a massive 7.35% dividend. Walgreens Boots Alliance Inc. (NYSE: WBA) is a pharmacy-led health and beauty retail company.

It operates through three segments:

• Retail Pharmacy USA
• Retail Pharmacy International
• Pharmaceutical Wholesale

The Retail Pharmacy USA segment sells prescription drugs and various retail products, including health, wellness, beauty, personal care, consumables, and general merchandise, through its retail drugstores. It also provides specialty pharmacy 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, health and wellness, beauty, personal care, and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as through boots.com and an integrated mobile application.

This segment operated 4,428 retail stores under the:

• Boots Benavides and Ahumada names in the United Kingdom, Thailand, Norway, the Republic of Ireland, the Netherlands, Mexico, and Chile
• 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
• Home healthcare supplies and equipment
• Related services to pharmacies and other healthcare providers

Verizon Communications

This top telecommunications company offers tremendous value while paying a 7.06% dividend. Verizon Communications Inc (NYSE: VZ) is one of the largest US telecom companies. It provides wireless and wireline services to retail, enterprise, and wholesale customers.

The company’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.

Verizon also provides

• Converged communications
• Information
• Entertainment services over America’s most advanced fiber-optic network and delivers integrated business solutions to customers worldwide.

Verizon and the other big telecom giants have been mauled over the last year over concerns over lead phone lines, and while this could keep a lid on the stock in the near term, many feel it’s the best buying opportunity in years.

3M

This top company could jump with an economic pick-up in 2024, and the shares are down significantly over the last year while paying investors a 5.49% dividend. 3M Co. (NYSE: MMM) provides diversified technology services in the United States and internationally.

3M operates through four segments:

• Safety and Industrial
• Transportation and Electronics
• Health Care
• Consumer

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
• Electrical original equipment manufacturers
• Structural adhesives and tapes
• Respiratory, hearing, eye, and fall protection solutions
• Natural and color-coated mineral granules for shingles

The Transportation and Electronics segment provides

• Ceramic solutions
• Attachment tapes
• Films, sound, and temperature management for vehicles
• Premium large-format graphic films for advertising and fleet signage
• Light management films and electronics assembly solutions
• Packaging and interconnection solutions
• Reflective signage for highway and vehicle safety

The Healthcare segment offers

• healthcare procedure coding and reimbursement software
• skin, wound care, and infection prevention products and solutions
• dentistry and orthodontic solutions
• 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
• Consumer air quality solutions
• Stationery products

Dow

This company was spun out from Dupont in 2019 and offers investors growth, income potential, and a hefty 5.11% dividend. Dow Inc. (NYSE: DOW) is a leading materials science company formed due to the merger of Dow and DuPont in 2017 and subsequent spin in 2019.

The company is organized into three principal divisions:

• Performance Materials and coatings
• Industrial Intermediates and infrastructure
• Packaging and specialty Plastics

The Company’s segments include:

• Agricultural Sciences, which provides crop protection
• Seed/plant biotechnology products and technologies, urban pest management solutions, and healthy oils.

Consumer Solutions consists of:

• Consumer Care
• Dow Automotive Systems
• Dow Electronic Materials
• Consumer Solutions-Silicones businesses

Infrastructure Solutions, which consists of

• Dow Building & Construction
• Dow Coating Materials
• Energy & Water Solutions
• Performance Monomers
• Infrastructure Solutions-Silicones businesses

Performance Materials & Chemicals, which consists of:

• Chlor-alkali and Vinyl,
• Industrial Solutions and Polyurethanes businesses

Performance Plastics, which consists of:

• Dow Elastomers
• Dow Electrical and Telecommunications
• Dow Packaging
• Specialty Plastics, Energy, and Hydrocarbon businesses

International Business Machines

This blue-chip giant still offers investors an excellent entry point and a rich 4.06% dividend. International Business Machines Corp. (NYSE: IBM) provides integrated solutions and services worldwide.

The company operates through four business segments:

• Software
• Consulting
• Infrastructure
• Financing

The software segment offers hybrid cloud platforms and software solutions like:

• Red Hat, an enterprise open-source solution
• Software for business automation
• AIOps and management, integration, and application servers
• Data and artificial intelligence solutions
• 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 the banking, airline, and retail industries.

The consulting segment offers:

• Business transformation services, including strategy
• Business process design and operations
• Data and analytics
• System integration
• Technology consulting
• 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
• Support services and solutions for hybrid cloud infrastructure and remanufacturing and remarketing services for used equipment
• The financing segment offers lease, installment payment, loan financing, and short-term working capital financing services

Again, it’s important to remember that the big move higher the market has been on in the fourth quarter comes right into the headwind of a 5.5% increase in the fed-funds rate over the last 18 months. The tricky part for investors is when the rate increase will put a dent in the economy, and while that remains unknown, history says it will indeed happen.

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