Investors love dividend stocks, especially high-yield ones, because they offer significant income streams and have substantial total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
The Dogs of the Dow is a well-known strategy first published in 1991 by Michael O’Higgins. The plan aims to maximize investment yields by purchasing the 10 highest-yielding dividend stocks 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.
While the recent April rally that brought stocks out of bear market territory has been a significant relief to investors, we could be in for a long summer, and the balance of 2025 could be just as volatile as what we have seen through the first four months of the year. The battle over the U.S. tariffs could stay front and center, and inflation could begin to spike as the tariffs kick in. With the S&P 500 down almost 5% and the Nasdaq down 8% even after the impressive rally, we decided to screen the Dogs of the Dow, looking for the highest-yielding stocks that are outperforming the S&P 500 and the Nasdaq.
Why do we cover the Dogs of the Dow?
Since the turn of the century, the Dogs of the Dow have significantly outperformed the overall Dow Jones industrials and the Small Dogs of the Dow, which are the five highest-yielding stocks, even more. The fact that investors are buying the highest-yielding companies in the venerable index improves the chances for total return gains.
Verizon
Verizon Communications Inc. (NYSE: VZ | VZ Price Prediction), commonly known as Verizon, is an American multinational telecommunications conglomerate that still offers tremendous value. It trades 9.13 times its estimated 2026 earnings and is up almost 13% in 2025. Verizon provides a range of communications, technology, information, and entertainment products and services to consumers, businesses, and government entities worldwide.
It operates in two segments:
- Verizon Consumer Group
- Verizon Business Group
The Consumer segment provides wireless services across the United States through Verizon and TracFone networks, as well as through wholesale and other arrangements.
It 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 Mid-Atlantic (including the District of Columbia) and northeastern United States through its fiber-optic network, Verizon Fios product portfolio, and 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.
Goldman Sachs has a Buy rating and a price target of $52 on the stock.
Johnson & Johnson
This American multinational corporation specializes in pharmaceuticals, biotechnology, and medical devices. Johnson & Johnson (NYSE: JNJ) is among the most conservative of the major pharmaceutical companies, and it is trading up 8% in 2025 on the strength of a diverse product portfolio and a familiar, solid brand. The company researches, develops, manufactures, and sells a range of healthcare products. Its primary focus is products related to human health and well-being, and it operates through two segments.
The Innovative Medicine segment is focused on various therapeutic areas, including:
- Immunology
- Infectious diseases
- Neuroscience
- Oncology
- Pulmonary hypertension
- Cardiovascular and metabolic diseases.
Products in this segment are distributed directly to retailers, wholesalers, distributors, hospitals, and healthcare professionals for prescription use.
The MedTech segment encompasses a diverse portfolio of products utilized in orthopedics, surgery, interventional solutions, cardiovascular intervention, and vision. It also offers a commercially available intravascular lithotripsy platform for the treatment of coronary artery disease and peripheral artery disease.
Citigroup has a Buy rating with a $185 price objective.
Coca-Cola
Coca-Cola Co. (NYSE: KO) is an American multinational corporation founded in 1892. Its stock is up a stunning 15% this year and remains a top long-time holding of Warren Buffett, who owns a massive 400 million shares. The world’s largest beverage company offers consumers more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands, including:
- Diet Coke
- Coca-Cola Light
- Coca-Cola Zero Sugar
- Caffeine-free Diet Coke
- Cherry Coke
- Fanta Orange
- Fanta Zero Orange
- Fanta Zero Sugar
- Fanta Apple
- Sprite
- Sprite Zero Sugar
- Simply Orange
- Simply Apple
- Simply Grapefruit
- Fresca
- Schweppes
- Dasani
- Fuze Tea
- Glacéau Smartwater
- Glacéau Vitaminwater
- Gold Peak
- Ice Dew
- Powerade
- Topo Chico
- Minute Maid
Globally, it is the top provider of sparkling beverages, ready-to-drink coffees, juices, and juice drinks.
Through the world’s most extensive beverage distribution system, consumers in more than 200 countries enjoy the company’s beverages at a rate of more than 1.9 billion servings a day. It’s also important to remember that the company owns 16.7% of Monster Beverage, which continues to deliver big numbers.
UBS has a Buy rating with a $86 price objective.
IBM
International Business Machines Corp. (NYSE: IBM), nicknamed Big Blue, is an American multinational technology company. The legacy blue-chip tech giant offers conservative investors a safer way to play the technology sector and AI, and it is up over 13% in 2025. IBM provides integrated solutions and services worldwide and operates through four segments.
The Software segment offers a hybrid cloud and AI platform that allows clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. IBM has partnered with Amazon Web Services (AWS) to allow users to access Watson X AI features and its data platform. IBM also partnered with Palo Alto Networks, allowing the cybersecurity company to acquire IBM’s QRadar Software as a Service (SaaS) assets.
The Consulting segment focuses on skills integration for strategy, experience, technology, and operations by domain and industry. The Infrastructure segment provides on-premises and cloud-based server and storage solutions and life-cycle services for hybrid cloud infrastructure deployment. And the Financing segment offers client and commercial financing that facilitates IBM clients’ acquisition of hardware, software, and services.
The company has a strategic partnership with various companies, including:
- Hyperscalers
- Service providers
- Global system integrators
- Software and hardware vendors, including Adobe, Amazon Web Services, Microsoft, Oracle, Salesforce, Samsung, and SAP
Oppenheimer has an Outperform rating and a $320 target price.
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