Investors looking for dividend stocks among the Dow Jones components are drawn to Verizon (VZ) and AT&T (T). After all, these two telecom giants offer the highest yields of the 30 Dow stocks. However, despite their near 7% dividend yields, both stocks have been disappointments for income investors this year. Sure, their quarterly dividend payments have been nice, but this year Verizon’s stock has fallen over 9% and AT&T isn’t far behind with nearly a 6% drop. Meanwhile, the Dow Jones index has gained over 5% in 2010.
While just picking the highest yielding dividend stocks hasn't been a winning strategy in 2010, that doesn’t mean that investors should stay away from stocks with high yields altogether. In fact, 9 out of the 12 highest yielding dividend stocks in the Dow have posted gains this year. 6 Dow dividend stocks have already posted gains of over 10% this year. That doesn’t include their dividend yield (which ranges from 3% - 5%).
Only three other Dow stocks have posted better 2010 performances than DuPont, which has seen their stock price climb over 16% since the beginning of the year. In January the stock was yielding over 5% and still offers an impressive 4.2% yield following their strong stock performance.
Home Depot (HD)
Home Depot’s stock price has been climbing steadily higher since reporting earnings in February. The stock has gained 15% since the beginning of 2010, but still yields 2.8%.
Even with a 15% gain in their stock price this year, Caterpillar still offers a 2.6% dividend yield. Growth prospects at this industrial firm appear bright as well, with analysts expecting earnings to grow by 22% this year and 49% in 2011.
Kraft Foods (KFT)
Kraft is the 4th highest yielding stock in the Dow index with a 3.8% dividend yield. In 2010, investors have not only enjoyed their nice yield, but also the 11% gain in their stock price.
Intel increased their quarterly dividend by 12.5% in January and currently offers investors a 2.8% dividend yield. Dividend growth investors are not only happy with the dividend increase, but also the 11% jump in Intel’s share price this year.
Since 2006, McDonald’s has been the top performing stock in the Dow Jones index. Their stock gained 86% in that time frame and is up 10% again in 2010. The fast food chain offers dividend investors a 3.2% dividend yield and has increased their dividend every year since 1976.
Don’t be fooled by AT&T and Verizon’s subpar performances this year -- high yielding Dow dividend stocks are thriving in 2010.
Disclosure: No positions