Investing

The 3 Highest Yielding Dogs of the Dow Are December Holiday Bargains

Lee Jackson

Published: December 11, 2024 6:18 am

Last Updated: December 11, 2024 10:08 am

Key Points

• The slightly better jobs report in November likely means the December rate cut is another 25 basis points.
• Dividend stocks will be in significant demand over the next year.
• Owning a Dogs of the Dow ETF is a strategy savvy financial advisors employ for clients. If you want to do the same, click here to learn more. (sponsored)

The Dow Jones industrial average is a price-weighted average of 30 blue-chip U.S. stocks that are often industry leaders. It’s the oldest U.S. market index, dating back over 100 years, and has been a followed stock market indicator since 1928. The Dow is considered the world’s most recognizable stock indicator and is the only index made up of companies that have consistently performed well over an extended period.

The Dogs of the Dow is a well-known strategy that was first published in 1991 by Michael Higgins. The plan seeks to maximize the yield of investments by buying the ten highest-paying dividend stocks available from the Dow 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.

While the Nasdaq surged 30% and the S&P 500 is up 26% in 2024 after a massive 2023, investors attempting to chase the market rally may find themselves in a precarious position. At this point, picking up nickels in front of a bulldozer may be dangerous as the market is as expensive and overbought as it was in 1929.

We screened the Dogs of the Dow, and three of the highest-yielding stocks in the group are cheap and pay big passive income dividends.

Why do we cover dividend stocks?

Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

Verizon

This top telecommunications company offers tremendous value, trading at 9.5 times estimated 2025 earnings and paying investors a strong 6.41% dividend. Verizon Communications Inc. (NYSE: VZ), through its subsidiaries, provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide.

It operates in two segments:

• Verizon Consumer Group
• Verizon Business Group

The Consumer segment provides wireless services across the wireless networks in the United States under the Verizon and TracFone brands and through wholesale and other arrangements.

Verizon also provides fixed wireless access (FWA) broadband through its wireless networks and related equipment and devices, such as:

• Smartphones
• Tablets
• Smartwatches and other wireless-enabled connected devices

The segment also offers wireline services in the northeastern and mid-Atlantic United States, including the District of Columbia, through its fiber-optic network, Verizon Fios product portfolio, and a copper-based network.

The Business segment provides wireless and wireline communications services and products, including:

• FWA broadband
• Data
• Video and conferencing
• Corporate networking
• Security and managed network
• Local and long-distance voice
• Network access services to deliver various IoT services and products to businesses, government customers, and wireless and wireline carriers in the United States and internationally

Chevron

This integrated giant is a safer way for investors looking to position themselves in the energy sector. It pays a rich 4.20% dividend. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide through its subsidiaries.

The company operates in two segments:

• Upstream
• Downstream

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines
• Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum product
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

Chevron announced last year that it has entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion.

Three lawsuits have been filed against Hess, charging inadequate disclosure over the sale, and Chevron has said arbitration over Hess’s Guyana assets could delay the closing timeline until October 2025. However, most Wall Street analysts feel the deal will ultimately be completed, and Chevron will emerge even more powerful in the energy sector.

Johnson & Johnson

With a diverse product base and an excellent brand, Johnson & Johnson (NYSE: JNJ) is among the most conservative big pharmaceutical plays and pays a solid 3.32% dividend. The company researches, develops, manufactures, and sells various products in the healthcare field worldwide.

The company’s Innovative Medicine segment offers products for various therapeutic areas, such as:

• Immunology, including rheumatoid arthritis, psoriatic arthritis, inflammatory bowel disease, and psoriasis
• Infectious diseases including HIV/AIDS
• Neuroscience, consisting of mood disorders, neurodegenerative disorders, and schizophrenia
• Oncology, such as prostate cancer, hematologic malignancies, lung cancer, and bladder cancer
• Cardiovascular and metabolism, including thrombosis, diabetes, and macular degeneration
• Pulmonary hypertension comprising pulmonary arterial hypertension

Its MedTech segment provides Interventional Solutions, including:

• Electrophysiology products to treat heart rhythm disorders
• The heart recovery portfolio, which includes technologies to treat severe coronary artery disease requiring high-risk PCI or AMI cardiogenic shock
• Neurovascular care that treats hemorrhagic and ischemic stroke.

This segment also offers an orthopedics portfolio that includes products and enabling technologies that support hips, knees, trauma, spine, sports, and others:

• Surgery portfolios comprising advanced and general surgery technologies, as well as solutions for breast aesthetics, ear, nose, and throat procedures
• Contact lenses under the ACUVUE Brand
• TECNIS intraocular lenses for cataract surgery

Four Contrarian Stocks With Passive Income Dividends as High as 15%