3 Outperforming Dogs of the Dow with Yields Over 4%

NYSE: DOW | Dow Inc. News, Ratings, and Charts

DOW – The major market indexes ended last week in the green after a several-weeks-long selloff. The ‘Dogs of the Dow’ investment strategy is known for its ability to offer high and stable dividend yields in uncertain market conditions. High-yielding Dow Jones Industrial Average constituents Dow (DOW), Verizon Communications (VZ), and International Business Machines (IBM) have outperformed the benchmark index during the recent market correction. Thus, we think it could be wise to add these stocks to one’s watchlist. Let’s discuss.

Since the beginning of the year, the major market indexes have faced intense selling pressure due to the Federal Reserve’s aggressive monetary tightening to tame multi-decade high inflation, the war between Ukraine and Russia, supply disruptions arising from the war, and soaring energy and commodity prices. However, the benchmark indexes rebounded last week, with the S&P 500 ending its seven-week losing streak by gaining 6.6% over the past five days, posting its best week since November 2020. Also, the Dow Jones Industrial Average and the Nasdaq Composite have climbed 6.2% and 6.8%, respectively, over the past five days.

Amid uncertain market conditions, investors often opt for the ‘Dogs of the Dow‘ investing strategy. This strategy, popularized by Michael B. O’Higgins in 1991, usually picks the top 10 highest dividend-yielding stocks from the Dow Jones Industrial Average. The ‘Dogs of the Dow’ investment strategy aims to beat the Dow Jones Industrial Average by adding high-yield dividend stocks.

High yielding ‘Dogs of Dow’ stocks, Dow Inc. (DOW), Verizon Communications Inc. (VZ), and International Business Machines Corporation (IBM) have outperformed the benchmark index during the recent market meltdown. Given this backdrop, we believe investors could add these stocks to their watchlist because they yield a stable dividend and may rally further in price in the coming months due to their strong fundamentals.

Dow Inc. (DOW)

DOW is the holding company for the Dow chemical company and its subsidiaries. The Midland, Mich., company’s portfolio of plastics, industrial intermediates, coatings, and silicones businesses delivers a range of science-based products and solutions for its customers in various market segments like packaging, infrastructure, mobility, and consumer care.

On Jan. 25, 2022, DOW announced an agreement with Locus Performance Ingredients to sell its high-performance sophorolipid biosurfactants in the global home care and personal markets. The ingredients offer a substantial reduction in carbon footprint compared to conventional surfactants. The agreement should enable DOW to strengthen its position in the biosurfactants market.

DOW’s net sales increased 28.4% year-over-year to $15.26 billion for its first quarter ended March 31, 2022. The company’s net income increased 54.2% year-over-year to $1.55 billion. Also, its EPS came in at $2.11, representing a 59.8% increase year-over-year.

Over the last three years, DOW’s dividend payout has grown at a 58.74% CAGR, while its four-year average dividend yield is 4.49%. Its current dividend payout translates to a 4.05% yield.

Analysts expect DOW’s revenue for the quarter ending June 30, 2022, to increase 12% year-over-year to $15.55 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 21.7% in price year-to-date to close the last trading session at $69.06.

DOW’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall B rating, which translates to a Buy. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

It has an A grade for Value and a B grade for Quality. It is ranked #15 out of 91 stocks in the A-rated Chemicals industry. Click here to see the other ratings of DOW for Growth, Momentum, Stability, and Sentiment.

Verizon Communications Inc. (VZ)

VZ in New York City provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies. Its segments include Verizon Consumer Group and Verizon Business Group. Its consumer segment provides wireless and wireline communication services, while its business segment provides everything that the consumer segment offers, including data and video conferencing services.

On Feb. 22, 2022, VZ announced an agreement with Audi of America to bring 5G connectivity to the automaker’s U.S. lineup. This collaboration should enable 5G Ultra-Wideband connectivity in Audi vehicles, thereby providing the speed and telecommunication architecture necessary for highly personalized and augmented mobile services, new driver-assistance features, and connectivity-enabled innovations. The deal marks VZ’s first agreement with a global premium automaker for 5G-enabled automobiles.

For its fiscal first quarter, ended March 31, 2022, VZ’s total operating revenues increased 2.1% year-over-year to $33.55 million. The company’s property, plant, and equipment rose 0.9% to $292.56 billion over the fiscal year ended Dec. 31, 2021. Also, its operating income increased 0.3% year-over-year to $7.79 billion.

VZ’s dividend payout has grown at a 2.04% CAGR over the last three years. Its four-year average dividend yield is 4.40%, and its current dividend payout translates to a 4.98% yield.

For its fiscal 2023, VZ’s EPS is expected to increase 2.8% year-over-year to $5.56. Its revenue for the quarter ending June 30, 2022, is expected to increase 3.1% year-over-year to $33.75 billion. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 6% in price to close the last trading session at $51.40

VZ’s strong prospects are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

It has a B grade for Stability. Within the Telecom – Domestic industry, it is ranked #4 out of 21 stocks. To see the other ratings of VZ for Growth, Value, Momentum, Sentiment, and Quality, click here.

International Business Machines Corporation (IBM)

IBM in Armonk, N.Y., operates in the cloud and cognitive software, global business services; systems; and global financing segments. It also designs advanced semiconductors in partnership with IBM research.

On Feb. 15, 2022, IBM announced that it had acquired Neudesic, a leading U.S. cloud services consultancy specializing primarily in the Microsoft Azure platform and delivering services in multi-cloud. The acquisition will expand IBM’s hybrid multi-cloud services portfolio and advance its hybrid cloud and AI strategy.

Over the last three years, IBM’s dividend payout has grown at a 2.42% CAGR, while its four-year average dividend yield is 4.87%. Its current dividend payout translates to a 4.74% yield.

IBM’s revenues have increased 8% year-over-year to $14.19 billion for the first quarter, ended March 31, 2022. The company’s non-GAAP net income increased 25% year-over-year to $1.30 billion. Also, its non-GAAP EPS came in at $1.40, representing a 25% increase year-over-year.

Analysts expect IBM’s EPS and revenue for its fiscal year 2022 to increase 22.2% and 6.3%, respectively, year-over-year to $9.69 and $60.99 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. And over the past six months, the stock has gained 20.2% in price to close the last trading session at $139.27.

IBM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.

It has a B grade for Quality. It is ranked #24 out of 82 stocks in the Technology – Services industry. Click here to see the other ratings of IBM for Growth, Value, Momentum, Stability, and Sentiment.


DOW shares were trading at $68.43 per share on Tuesday morning, down $0.63 (-0.91%). Year-to-date, DOW has gained 23.37%, versus a -13.21% rise in the benchmark S&P 500 index during the same period.


About the Author: Dipanjan Banchur


Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...


More Resources for the Stocks in this Article

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