Meet the Preliminary Dogs of the Dow for 2021

Perhaps no year since World War II will be less missed than 2020. The coronavirus pandemic has claimed more than 1.7 million lives so far this year. In the United States, 18.5 million cases of COVID-19 have been identified and the death toll so far is approaching 327,000.

For investors, however, there have been some home runs and a lot of triples and doubles. Yet, there haven’t been a lot of singles, and that has weighed on returns for dividend investors.

One of the most popular strategies for dividend investing is known as the Dogs of the Dow. Investors buy shares in the 10 Dow stocks yielding highest dividends. Frequently these stocks have risen more than others because their shares were selling off or underperforming; hence, the term “dog.”

Using the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) that adds dividends and share price appreciation to calculate a total return, the index has posted a return of 8.28% for the year to date, far below 2019’s total return of 25.03%.

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In 2020, the range of dividend payments for the Dow 30 has been zero to 5.99%. Three stocks (Disney, Boeing and Salesforce) suspended dividends due to the impact of the coronavirus pandemic. Excluding these three stocks, the lowest dividend yield among the Dow 30 is currently 0.61% (Visa). The mean dividend among the 10 Dogs is 4.1%, and last year the 10 stocks posted a mean dividend payment of around 2.6%.

With just over a week to go in 2020, here’s a preliminary list of the Dogs of the Dow, based on a screen run after markets closed on December 21. We have rounded the dividend yield to the nearest tenth. One last note on the dogs: In August, the Dow dropped Exxon, Pfizer and Raytheon (formerly United Technologies) and added Salesforce.com, Amgen and Honeywell.

1. Chevron Corp. (NYSE: CVX | CVX Price Prediction): 6.0%
2. International Business Machines Corp. (NYSE: IBM): 5.3%
3. Dow Inc. (NYSE: DOW): 5.1%
4. Walgreens Boots Alliance Inc. (NASDAQ: WBA): 4.6%
5. Verizon Communications Inc. (NYSE: VZ): 4.2%
6. 3M Company (NYSE: MMM): 3.4%
7. Merck & Co. Inc. (NYSE: MRK): 3.3%
8. Cisco Systems Inc. (NASDAQ: CSCO): 3.2%
9. Coca-Cola Co. Inc. (NYSE: KO): 3.1%
10. Amgen Inc. (NASDAQ: AMGN): 3.1%

While it would take some major moves up by the runners-up, changes could occur if there are significant drops in the lowest yielding preliminary dogs. JPMorgan Chase currently yields 2.9%, and Intel’s yield also is 2.9%.

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