11 Favored Dividend Paying Firms within the Dow for 2017


The Dow 30 finally hit the symbolic 20,000 mark that everyone was waiting for yesterday. Since the election, the world has been anxiously watching as the Dow flirted with the index, but came just cents away.

Dividend investors are often attracted to stocks in the Dow Jones Industrial Average, since the components are typically safer choices that are widely traded. Plus, every stock on the Dow 30 pays a dividend. For investors who are attracted to the index, but prefer to invest in ETFs, there are a few options, including the SPDR Dow Jones Industrial Average ETF (NYSE: DIA). Here are the list of all companies within the Dow and the performance for the past twelve months;

12-MONTH % PRICE CHANGE (Data as of: 1/25/2017)
Company Name Ticker  % Price Change
Nike NKE -11.269
Coca Cola KO -0.095
McDonalds MCD 2.173
Pfizer PFE 2.59
WalMart WMT 5.422
Verizon VZ 5.826
General Electric GE 8.31
Home Depot HD 12.957
Walt Disney DIS 13.38
Proctor & Gamble PG 13.416
Travelers TRV 15.272
Exxon Mobil XOM 15.355
Visa V 16.95
Johnson & Johnson JNJ 17.012
Merck MRK 19.953
Apple AAPL 22.566
Microsoft MSFT 22.958
Intel INTC 27.703
3M MMM 28.466
United Technologies UTX 30.695
Cisco Systems CSCO 32.499
Boeing BA 34.957
American Express AXP 39.749
United Healthcare UNH 42.212
Dupont DD 44.688
Chevron CVX 44.938
International Business Machines IBM 46.044
J.P Morgan Chase JPM 54.563
Goldman Sachs GS 56.994
Caterpillar CAT 69.487

Our list is a take on the Dogs of the Dow. The “Dogs of the Dow” are the highest yielding components at the start of any given year. In the past sixteen years, the Dogs of the Dow have returned an average of 7.9%. This is above that of the overall Dow, which has returned a more meager 6.3% average return. The Dow stocks gained an exceptional 18.7% last year, with Caterpillar, Goldman Sachs, and J.P. Morgan leading the charge. Here are the Dogs of the Dow for 2017 with yield;

Verizon 4.33%
Pfizer 3.94%
Chevron 3.67%
Boeing 3.65%
Cisco Systems 3.44%
Coca-Cola 3.38%
International Business Machines 3.37%
ExxonMobil 3.32%
Caterpillar 3.32%
Merck 3.19%

Two stocks are not part of the Dogs list this year including Proctor & Gamble and WalMart, even though those two stocks did not perform nearly as well as other stocks that remained in the Dogs list for 2016, notably Caterpillar & Chevron.  New stocks entering the Dow are Coca-Cola and Boeing.  The beverage giant came into the Dogs list primarily due to poor performance, as it was one of the worst stocks last year.  Boeing came on the list not necessarily due to poor performance, but a large 30% dividend hike.

In our own list, we peruse our list of our Top 100 Dividend Stocks along with favoring those stocks that a part of our model portfolio of 29 stocks.  We like all the above firms with the exception of Caterpillar. We feel the stock run in 2016 was excessive and that consumer staples firms like Proctor & Gamble and McDonalds will perform better in the next twelve months;

Here is the list of our 11 favored firm within the Dow along with YTD performance and yield. We call the list our “Dogs of the Dow plus 1”

Company Price 1-day change YTD Dividend Yield
Boeing 167.36 4.24% 7.50% 3.40%
Chevron 117.24 0.75% -0.39% 3.70%
Cisco 30.7 0.33% 1.59% 3.40%
Coca-Cola 42.12 0.53% 1.59% 3.30%
Exxon Mobil 85.34 0.29% -5.45% 3.50%
IBM 178.29 1.36% 7.41% 3.15%
McDonald’s 121.79 0.61% 0.06% 3.10%
Merck 61.08 -0.21% 3.75% 3.19%
Pfizer 31.29 0.45% -3.66% 4.10%
Procter & Gamble 87.16 -0.80% 3.66% 3.10%
Verizon 49.77 -0.70% -6.76% 4.70%

 Boeing Co (NYSE: BA) has gained a lot of traction since the election, as the aerospace defense industry has been well performing. The stock currently offers a dividend yield of 3.4% and is up over 20% in the last three months. However, Boeing is still trading at a below market multiple of 16 times its future earnings estimates. The company has been committed to paying dividend since 1937 and has been raising its dividend since 2012. Most recently, Boeing raised its dividend by 30% in December. We like this giant dividend hike and thus have kept Boeing one of our top stocks to watch in 2017.  With its attractive payout, Boeing has the highest yield in its industry.

Chevron Corporation (NYSE: CVX) is up over 16% in the last three months, but is down slightly in 2017. The stock has trended upward since the election, which was expected since the Trump administration will most likely be very accommodative to the energy sector.  The stock currently trades at 20 times its future earnings estimates. Chevron has a current dividend yield of about 3.7%. The company has also shown solid commitment to shareholders by raising its dividend every year since 1986. Although the company has been boosting dividends, its last increase in November 2016, was only a 1% jump, or just 1 cent.

Cisco Systems, Inc. (NYSE: CSCO) is up just 1% in 2017 and trades at 12 times its future earnings estimates. The company has been in the spotlight due to its announcement that it plans to acquire acquire software start-up AppDynamics in a deal worth $3.7 billion. While the company has been flat in recent months, the stock is up over 30% in the past 12 months (compared to Dow performance of 18%). Cisco has been paying a dividend since 2011 and has been increasing its dividend every year. In February 2016, Cisco boosted its dividend by 22%.  We like the firm’s low valuation within the technology sector.

The Coca-Cola Co (NYSE: KO) has had flat performance so far this year, with an increase of just over 1%. The stock currently trades at 20 times its future earnings estimates. Despite Coca-Cola’s slow performance (the stock is only up about 20% in the last five years), the stock is a great opportunity for investors seeking dividend income. Regulation issues hurt Coca-Cola last year and its plans to increase efficiency failed to gain steam in 2016.  The strength in the U.S. dollar was also a major headwind for the international firm last year. The company currently offers a dividend yield of 3.3% and has raising its dividend every year for over 50 years (since 1963). Last February, Coca-Cola increased its dividend by 6%. It is likely that the company will follow the same pattern this year. Along with Pfizer and Exxon, it is one of our favored Dow stocks for 2017.

Exxon Mobil Corporation (NYSE: XOM) has declined over 5% this year, but in the last 12 months, the stock is up over 11%. Exxon currently trades at 16 times its future earnings estimates, lower than Chevron. Performance this year (-5.5%) has put Exxon as the worst Dow performer so far in 2017. Exxon has struggled to grow its production, but it has been eyeing up more M&A deals to expand its business. Exxon offers an excellent dividend yield, of about 3.5%. It has been raising its dividend every year since 1983, typically by about 6% per year. Last April, Exxon raised its dividend by 6%. It is likely that the company will continue this trend into 2017.  It recent purchase of premium Permian assets should allow Exxon to grow production much faster in the next several years. We think Exxon offer excellent value here in the mid $80’s.

International Business Machines Corp. (NYSE: IBM) is up about 18% in the last 3 months, which outperformed the S&P 500 index by more than double. The company currently trades at 12 times earnings estimates and has seen performance significantly above the Technology SPDR ETF (NYSE: XLK). From a dividend standpoint, IBM offers a dividend yield over 3% and has been increasing its dividend every year since 2000 and has been paying a dividend since 1913. In its most recent dividend increase in April 2016, IBM boosted its payout by 8%.

McDonald’s Corporation (NYSE: MCD) is up about 8% in the last three months, despite it being almost flat in 2017. The stock currently trades at 18 times earnings, but has been watched closely by analysts after introducing its all day breakfast (which is less profitable). The company has experienced a lot of challenges, specifically with the movement for healthy eating. However, the stock still continues to be a steady choice for many dividend investors. The company paid its first dividend in 1976 and has been continuously increasing dividends since its inception. McDonald’s recently raised its dividend by 6% in October.

Merck & Co., Inc. (NYSE: MRK) is up nearly 4% this year, which is above that of the Dow. It has outperformed the iShares Dow Jones US Pharma Index ETF (NYSE: IHE) by a wide margin over the last year as most other pharmaceutical stocks have underperformed. The stock currently trades at 14 times earnings and has a dividend yield of approximately 3.10%. Merck has received positive feedback from analysts due to its cancer drug, Keytruda. Its competitor in the field Bristol Myers has suffered several setbacks in the cancer area, allowing Merck’s Keytruda to become a substantial first line product for the healthcare firm.  In addition, the company has done an impressive job with vaccines, which will also benefit the company going forward. Merck’s dividend is nothing to ignore, either. The company currently offers a dividend yield of 3.10% and has a solid history of paying dividend. It last raised its dividend in November, by 2%. I expect dividend increases to accelerate beginning in 2017.

Pfizer Inc. (NYSE: PFE) saw a fair amount of volatility in the last 12 months and is currently trading at 11 times its future earnings. Despite the sluggish performance, the company has a lot of potential with major drugs in its pipeline. That being said, Pfizer has been a top choice for many dividend investors. The stock currently yields over 4%, after its recent 7% dividend boost in December. Last month, we featured Pfizer as our stock of the month. The detailed article focused upon all the strong merits of this healthcare giant. It is our favorite healthcare stock for 2017.

Procter & Gamble Co (NYSE: PG) is up nearly 4% so far this year and currently trades at 21 times its future earnings. The company has done an impressive job at staying innovative and paying attention to current consumer trends. P&G is known for being loyal to its shareholders with dividends, too. For over 60 years, the company has boosted its quarterly dividend on an annual basis. It January 20th earnings results were very positive. In the past two quarter, the firm has surprised on the upside in regard to sales growth. The management team raised their internal growth forecast for the first time in over two years last week. The stock currently offers a dividend yield of about 3.10%.

Verizon Communications Inc. (NYSE: VZ) is down on a year-to-date basis, but is up over 4% in the last four months. The stock currently trades at 12 times its future earnings. Shares of the telecom firm fell more than 4% this week after the company missed fourth-quarter earnings forecasts by three cents and reported declines in wireless and wireline sales.  The company’s $4.8 billion purchase of Yahoo has also weighed on sentiment.  While its stock performance will most likely be stagnate until next quarter, investors are always attracted to Verizon for its impressive dividend. The stock currently offers a dividend yield of about 4.75%. It has also been increasing its quarterly dividend every year since 2007. Most recently, Verizon increased its dividend by 2% last September.  The drop in the stock price offers investors a good entry point for those investors seeking exposure to high yield stocks one of the most defensive sectors of the market.

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