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Dividend Stocks

10 Highest Paying Dividend Stocks in the Dow

The 10 highest paying dividend stocks in the Dow Jones Industrial all yield more than 3%. But which of them would I buy today?

Nearly all 30 stocks in the Dow Jones Industrial Average pay dividends, but not all of them are exceptionally high dividend yields. 10 of the 30 stocks in the Dow yield 3% or more, but because of the Dow’s selectivity, it can be a great place to turn for yield if you’re seeking Dividend Aristocrats (stocks that have raised their dividends at least 25 years in a row) or high dividend blue-chip stocks. With that in mind, what are the highest paying dividend stocks in the Dow today?

Highest Paying Dividend Stocks in the Dow

  1. Verizon (VZ)
  2. IBM Corp (IBM)
  3. Walgreens Boots Alliance (WBA)
  4. Dow Inc. (DOW)
  5. 3M (MMM)
  6. Intel (INTC)
  7. JPMorgan (JPM)
  8. Chevron (CVX)
  9. Amgen (AMGN)
  10. Cisco (CSCO)

Like the index itself, the highest paying dividend stocks in the Dow are well-established, high-quality American companies. Many are over 100 years old. For some of them, however, their best days are behind them. Some have very high dividend payout ratios that show they’re returning most of their cash to shareholders at this point—rather than reinvesting in their business.

Below, I take a closer look at each of the highest paying dividend stocks in the Dow and separate the dogs from the dividend champs.

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1. Verizon (VZ)

Dividend Yield 5.2%

Telecoms typically pay high dividends, and the highest dividend yield in the Dow almost always belongs to Verizon. Verizon is one of the top five U.S. wireless carriers, but faces stiff competition from number-one AT&T (T) and its smaller (but recently merged) competitors Sprint (S) and T-Mobile (TMUS). All four telecoms have spent the recent years lowering prices and sweetening plans to lure customers, which has resulted in good deals for consumers, but has cut into corporate revenues and earnings. Verizon’s sales initially peaked in 2015, and it saw lower revenues in 2016-2017. But top-line growth swung higher in 2018, and after the 2020 debacle, the top line is once again in the ascendant (see chart below).

For its part, Verizon is investing heavily in forward-looking ventures, including the “internet of things” and digital content. While economic uncertainty persists going forward, it should be kept in mind that VZ has a tendency to outperform other Dow 30 components in periods of economic weakness, thanks largely to its healthy subscription-based business. In the Great Recession of 2008-2009, for instance, VZ experienced a price drop of only 33% compared with a far more devastating 50% drop for the broad market.

In a sign of Verizon’s health, wireless service revenue grew 7% to almost $18 billion in the fourth quarter of 2021, thanks to higher average revenue per account, volume growth and the company’s recent closing of its TracFone Wireless acquisition (post-paid subscription numbers, broadband and fixed wireless also performed well). The yield is also sustainable—VZ’s dividend payout ratio is 48%—and that’s one reason to own the stock right now.

2. IBM Corp. (IBM)

Dividend Yield 4.8%

Big Blue has been a laggard performer among Dow 30 stocks in recent years and fell 40% from its high to low during the early 2020 selling panic, to 90, before recovering to just under the 145 level in mid-2021. IBM is still under its 2020 high of 160, however, and well below its record high of 215.

IBM’s revenues have been declining since peaking at $107 billion in 2011. IBM was slow to adapt as computing and data storage moved to the cloud, and competitors were quick to swoop in. IBM reacted by winding down older operations and investing in faster-growing businesses, but margins and cash flow eroded despite their best efforts, and the stock peaked in 2013. The company has increased the dividend each year anyway, with the latest one at $1.64 per share.

Things could be starting to turn around for IBM, however, as management sees “high demand for our capabilities in several areas,” including hybrid cloud, where the company now has 3,800 clients, or 1,000 more than a year ago.

3. Walgreens Boots Alliance (WBA)

Dividend Yield 4.3%

Not long ago, Goldman Sachs analysts classified WBA as a “dividend all-star,” and for good reason. The second-largest pharmacy store chain in the U.S., WBA’s dividend yield has risen at a compound annual rate of nearly 7% since 2015. It also has a multi-decade record of continual dividend increases, landing it on the Dividend Aristocrats for yet another year.

While the company’s earnings have been flat in recent years, revenue has tended to grow in the low single-digits. Moreover, its earnings tend to hold up well during economic downturns (as was seen during last year’s COVID-19 pandemic).

For 2022, however, WBA is expected to see unchanged revenues after dipping 5% in 2021. Analysts estimate revenues this year of around $132 billion which, if realized, would be a 0.5% decrease from a year ago. And while the firm’s EPS is also expected to decline 5% this year, analysts see per-share earnings rising between 5% and 7% in the next three years. All told, given WBA’s tendency to profit in a climate of slow economic growth, investors would do well to give it a closer look.

4. Dow Inc. (DOW)

Dividend Yield 4%

Dow is a commodity chemical producer which many investors consider to be both a “contrarian cyclical” play as well as having short-cycle exposure. In the face of the anticipated post-pandemic manufacturing rebound around the world, some analysts have already upgraded DOW based on its operating leverage and excellent management. While DOW’s stock price fell 58% during the early 2020 market rout, its long-term history of maintaining a healthy dividend was left intact and makes it a worthwhile consideration for income-oriented investors.

And while other industries are likely to be negatively impacted by inflation and rising interest rates, Dow should thrive in such an environment. Indeed, management recently observed that “inflation has always been a positive for our business, and over the last 30 years, when the Fed raises interest rates, that typically tends to drive outperformance in our sector versus the other sectors.” Moreover, Dow should benefit as global demand for commodities chemicals increases as economies around the world reopen.

5. 3M (MMM)

Dividend Yield 3.9%

Long-time Dow 30 component 3M produces more than 60,000 products under several brands and across numerous industry categories. Of note, 3M is one of the longest-reigning Dividend Aristocrats after 63 years of dividend growth.

The company is known for having superb cash flow generation, with guiding for operating cash flow of around $7.5 billion for 2022, contributing to a 95% free cash flow conversion. It also has an attractive valuation when compared to many of its Dow 30 peers.

For 2022, the consensus expects 3M’s top and bottom line to grow 3%. Income-oriented investors would do well to give this stock a closer look.

6. Intel (INTC)

Dividend Yield 3.3%

One of the world’s largest chip makers by revenue, Intel has also assumed a leadership position in innovation for cloud computing, data center, Internet of Things (IoT) and PC solutions, allowing it to emerge as a top choice for tech-oriented investors in the wake of the post-pandemic work from home paradigm.

After a tough past year, Intel has created a new plan to revitalize its business. The company plans to increase revenue growth into the mid-to-high-single digits range in 2023 and 2024, then accelerate annual sales growth to around 12% by 2026. Margins, meanwhile, are expected to rebound to around 52% next year and in 2024 and peak at about 56% by 2026.

All told, Intel should be regarded as a strong tech sector play for yield-conscious investors.

7. JPMorgan (JPM)

Dividend Yield 3.3%

JPMorgan Chase is the largest bank in the U.S. by assets (more than $3 trillion) and the fifth-largest bank globally, coming in on the heels of China’s “Big Four” banks. And while the Great Recession forced the company to trim dividends (thus keeping it out of the ranks of the Dividend Aristocrats), JPMorgan has raised its dividend twenty-fold from those lows ($0.20 annually in 2010 to $4.00 annualized in 2022).

The company currently trades at a price/book ratio of nearly 1.4, which is a premium to peers (Bank of America and Wells Fargo trade at p/b ratios of 1.2 and 1 respectively while Citigroup trades at a discounted ratio of .52).

Analysts are projecting declining growth this year due to ongoing market and real economy conditions, but expect double-digit growth to resume next year based on a combination of improving markets and a potentially higher net interest spread.

Although the firm missed on earnings in the first quarter of 2022, leadership was vocal about their commitment to shareholders and the dividend, with CEO Jamie Dimon saying, “Our longstanding capital hierarchy remains the same – first and foremost, to invest in and grow our market-leading businesses; second, to pay a sustainable competitive dividend; and then, to return any remaining excess capital to shareholders through stock buybacks.”

8. Chevron (CVX)

Dividend Yield 3.3%

Chevron is one of the world’s largest oil companies, with energy exploration, production, refining, trading and transport operations that circle the globe. Founded in 1879, Chevron has paid dividends since 1970.

Like the rest of the energy sector, Chevron’s stock tanked in early 2020, but bottomed last spring after losing 55% of its value during the pandemic crash.

Chevron has a steady record of dividend payments despite crises in the energy sector, most recently increasing its dividend 6% earlier this year. Although the stock’s dividend payout ratio has popped over 100% several times, CVX is currently on the Dividend Aristocrats list.

Wall Street believes revenues will increase 11% this year, as oil prices have been in a bull market cycle. Per-share earnings, meanwhile, are expected to increase 33% this year, to 10.83. Like its peer Exxon, the stock is choppy at times and has a tendency to surge and crash with oil prices. But with crude prices hovering around $100 a barrel, CVX is a worthwhile choice for investors who want some exposure to the red-hot energy sector.

9. Amgen (AMGN)

Dividend Yield 3.2%

Amgen is one of the world’s largest independent biotechnology firms, developing therapies for patients suffering from a variety of serious illnesses based on advanced human genetics tools.

Despite less-than-stellar top- and bottom-line growth anticipated for 2022, the company has managed to maintain a steadily rising dividend in recent years—including a recent 10% dividend increase in early 2022. Amgen’s drug portfolio brought in $26 billion in revenue in 2021, and its revenues have a solid long-term track record.

Looking ahead, analysts see Amgen’s bottom line increasing 3% for full-year 2022, followed by two years of around 10% per-share earnings growth.

10. Cisco (CSCO)

Dividend Yield 3%

Rounding out the top 10 list is Cisco with a lower, but still respectable, dividend yield of 3%. The tech stalwart, in the most recent quarter, reported 30% order growth for the second quarter in a row. While impressive, analysts do not anticipate that growth rate to be sustainable.

In response to supply-chain challenges, Cisco previously announced a number of price hikes which prompted customers to accelerate orders and led to 6% YOY revenue growth in Q2 and 18% YOY earnings growth. Even with an anticipated order slowdown, Cisco remains highly profitable and generates significant cash flow that it ultimately returns to shareholders.

In fact, Cisco recently raised the dividend by 3% and authorized an additional $15 billion in share buybacks, with the company guiding for 6% revenue growth in 2022.

The company is facing some headwinds as customers migrate to the cloud. However, a software and subscription model and new products are a point of emphasis for relatively new CEO, Chuck Robbins, who said “Our robust order strength, record backlog and double-digit growth in annual recurring revenue position us well to deliver growth.”

A successful pivot to recurring revenues, even if the face of customer cloud migration, should support keeping Cisco on your radar.

Gold & Metals Expert Clif Droke

Clif Droke is Chief Analyst of Cabot SX Gold & Metals. For over 20 years, he has worked as a writer, analyst and editor of several market-oriented advisory services and has written several books on technical trading in the stock market, including “Channel Buster: How to Trade the Most Profitable Chart Pattern” and “The Stock Market Cycles.”

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*This post has been updated from an original version, published in 2018.

By Clif Droke

Clif Droke is Chief Analyst of Cabot SX Gold & Metals. For over 20 years, he has worked as a writer, analyst and editor of several market-oriented advisory services and has written several books on technical trading in the stock market, including “Channel Buster: How to Trade the Most Profitable Chart Pattern” and “The Stock Market Cycles.”

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