When U.S. markets opened for trading on August 31, 2020, there were three new stocks in the Dow Jones industrial average. Exxon Mobil, Pfizer and Raytheon (United Technologies) had been replaced by Salesforce, Amgen and Honeywell. The change was S&P’s attempt to offset Apple’s four-for-one stock split in the price-weighted index. That lineup lasted through all of 2021 and will be the same headed into 2022.
In 2019, the Dow 30 index rose by 22.34%. In COVID-19 plagued 2020, the index managed a gain of 7.25%, and as of last Friday’s close, the Dow was up 18.61% for 2021. That is somewhat below the overall market as measured by the S&P 500, which rose by 28.88% in 2019, 16.26% in 2020 and is up by 27.56% in 2021.
By contrast, the Nasdaq Composite rose most in 2020, posting a gain of 43.64%, better than its gain of 35.23% in 2019 and more than double its gain of 21.45% in 2021. The lockdowns and closures associated with the pandemic raised demand for tech products and resulted in the Nasdaq’s third-highest return in the first two decades of the 2000s.
Investors comfortable with more risk look to growth stocks for better returns, while those seeking less risk turn to dividend-paying stocks. All but three Dow stocks pay a dividend, and the 10 that pay the highest dividend at the end of the year are known as the Dogs of the Dow for the following year.
One of the most popular strategies for dividend investing is buying the Dogs of the Dow at the end of the year, setting a solid foundation for the year ahead. Frequently these stocks have risen more than others because their shares were selling off or underperforming; hence, the term “dog.”
Two Dow stocks, Disney and Boeing, have suspended their dividends while one, Salesforce, has never paid a dividend.
The range of dividends paid by the Dogs in 2020 was 0.61% to 6.05%. To date in 2021, the range is 0.49% to 5.01%. With less than a week to go in 2021, here’s a preliminary list of the Dogs of the Dow for 2022 and their yields, based on a screen run after markets closed on December 27.
- Dow Inc. (NYSE: DOW): 5.01%
- International Business Machines Corp. (NYSE: IBM): 4.98%
- Verizon Communications Inc. (NYSE: VZ): 4.76%
- Chevron Corp. (NYSE: CVX): 4.51%
- Walgreens Boots Alliance Inc. (NASDAQ: WBA): 3.69%
- Merck & Co. Inc. (NYSE: MRK): 3.60%
- Amgen Inc. (NASDAQ: AMGN): 3.45%
- 3M Co. (NYSE: MMM): 3.35%
- Coca-Cola Co. (NYSE: KO): 2.86%
- Intel Corp. (NASDAQ: INTC): 2.68%