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Investors are concerned about large budget deficits and Fed’s loose monetary policy. One of the most successful hedge fund managers, Ray Dalio, believes that the devaluation of the heavily indebted country currencies is inevitable, and investors should protect themselves for the near future.

Like Ray Dalio, we also believe that investors should play more defensively and invest in high dividend yielding stocks in the upcoming inflationary environment. High dividend stocks generally perform well and usually increase dividend payments over the succeeding 5-10 years. We believe high dividend yielding stocks will perform better than T-bonds over the next 10 years.

We compiled this list of 30 Dow stocks and ranked them based on their annualized dividend yields. The stocks with higher and lower dividends, and their performances are shown below:

HIGHER DIVIDEND YIELDS

Dividend Yield

YTD Return

52-Week Return

AT & T

T

5.67%

7.67%

25.76%

Verizon

VZ

5.31%

6.74%

43.57%

Merck & Co Inc.

MRK

4.21%

2.41%

7.16%

Pfizer Inc.

PFE

3.99%

16.19%

41.24%

Intel Corp.

INTC

3.63%

11.79%

9.62%

Johnson & Johnson

JNJ

3.42%

9.79%

21.24%

Kraft Foods Inc.

KFT

3.27%

14.44%

25.46%

Procter & Gamble Co.

PG

3.27%

2.28%

8.04%

General Electric Co.

GE

3.15%

5.66%

29.00%

DuPont

DD

2.99%

11.62%

50.32%

Chevron Corp.

CVX

2.86%

21.25%

53.37%

Travelers Companies Inc.

TRV

2.85%

4.69%

19.98%

Mc Donald Corp.

MCD

2.76%

17.19%

27.92%

Home Depot

HD

2.74%

5.67%

33.43%

Coca Cola Co.

KO

2.70%

7.56%

32.26%

AVERAGE

9.66%

28.56%

LOWER DIVIDEND YIELDS

Dividend Yield

YTD Return

52-Week Return

Wal-Mart Stores

WMT

2.68%

2.48%

9.90%

JP Morgan Chase

JPM

2.37%

0.72%

8.74%

Microsoft Corp.

MSFT

2.32%

-0.15%

9.12%

3M Company

MMM

2.31%

11.84%

15.32%

Boeing Co.

BA

2.31%

12.60%

11.66%

Exxon Mobil Corp.

XOM

2.21%

17.82%

47.06%

United Technologies Corp.

UTX

2.19%

12.58%

28.97%

Caterpillar Inc.

CAT

1.75%

13.75%

57.53%

IBM

IBM

1.62%

27.25%

47.88%

Cisco Systems Inc.

CSCO

1.46%

-18.03%

-28.74%

American Express Co

AXP

1.38%

23.15%

22.95%

Hewlett Packard Co.

HPQ

1.31%

-12.37%

-19.59%

Walt Disney Co.

DIS

0.98%

8.37%

22.33%

Alcoa Inc.

AA

0.76%

3.19%

47.53%

Bank of America Corp.

BAC

0.39%

-23.95%

-25.62%

AVERAGE

5.28%

17.00%

In the last 52-week period, the average return of the high dividend Dow stocks was 28.56%. The second group of 15 stocks with lower dividend yields returned 17.00% on average, underperforming the stocks in the first group. The performance of the first group was still better since the beginning of this year. The average YTD return of the first group was 9.66% vs. 5.28% for the second group.

Here are the top 10 Dow stocks with the highest dividend yields:

1. AT & T (NYSE:T): AT & T is a large telephone and television services provider. T has a 5.67% dividend yield and returned 25.76% during the past 12 months. T recently traded at $30.32 and gained 7.67% year-to-date. The stock has a market cap of $179.56B and P/E Ratio of 9.19. Phill Gross holds nearly $400M of T. Cliff Asness, George Soros, D.E. Shaw and Jim Simons are also among T investors.

2. Verizon (NYSE:VZ): Verizon is a global telecommunications company. VZ has a 5.31% dividend yield and returned 43.57% to its investors during the past 12 months. VZ recently traded at $36.74 and returned 6.74% since beginning of this year. The stock has a market cap of $103.94B and P/E ratio of 19.44. Phil Gross' Adage Capital had nearly $150 Million of VZ at the end of March 2011.

3. Merck & Co Inc. (NYSE:MRK): Merck & Co Inc. is one of the largest pharmaceutical companies in the world. MRK has a 4.21% dividend yield and returned 7.16% during the past 12 months. MRK recently traded at $36.09 and returned 2.41% year-to-date. The stock has a market cap of $111.39B and P/E ratio of 69.40. Ric Dillon holds the largest MRK position among the 300-plus funds we are tracking.

4. Pfizer Inc. (NYSE:PFE): Pfizer Inc. is another leading pharmaceutical company in the world. PFE has a 3.99% dividend yield and returned 41.24% during the past 12 months. PFE recently traded at $20.07 and returned 16.19% in 2011. The stock has a market cap of $158.58B and P/E ratio of 18.93. David Einhorn has the largest PFE position among the funds we are tracking, holding more than $500 Million of the stock (Check out David Einhorn’s other top stock picks). Ken Fisher, Lee Ainslie, David Tepper and Phil Gross are prominent PFE investors.

5. Intel Corp. (NASDAQ:INTC): Intel Corp. is a global technology company that manufactures microprocessor products. INTC has a 3.63% dividend yield and returned 9.62% during the past 12 months. INTC recently traded at $23.13 and returned 11.79% since the beginning of this year. The stock has a market cap of $122.64B and P/E ratio of 10.47. Ken Fisher, Paul Ruddock, Jim Simons and Phill Gross are among INTC investors.

6. Johnson & Johnson (NYSE:JNJ): Johnson & Johnson is a multinational company that provides consumer healthcare and pharmaceutical products. JNJ has a 3.42% dividend yield and returned 21.24% during the past 12 months. JNJ recently traded at $66.72 and returned 9.79% year-to-date. The stock has a market cap of $182.89B and P/E ratio of 15.96. Warren Buffett is the largest holder with a $2.5 Billion position. JNJ is one of the most popular stocks among hedge funds (see the complete list of 10 Most Popular Stocks Among Hedge Funds here).

7. Kraft Foods Inc. (KFT): Kraft Foods Inc. is an American food company providing snacks, confectionery, and quick meal products worldwide. KFT has a 3.27% dividend yield and returned 25.46% during the past 12 months. KFT recently traded at $35.43 and returned 14.44% in 2011. The stock has a market cap of $62.28B and P/E ratio of 20.60. Buffett had $3 Billion invested in KFT shares. Bill Ackman also holds a large KFT position.

8. Procter & Gamble Co. (NYSE:PG): Procter & Gamble Co. is a global company that provides a wide range of consumer packaged goods. PG has a 3.27% dividend yield and returned 8.04% during the past 12 months. PG recently traded at $64.25 and returned 2.28% year-to-date. The stock has a market cap of $179.34B and P/E ratio of 16.91. Warren Buffett had a massive $4 Billion in PG. Phill Gross, Ken Fisher, Brett Barakett, Ric Dillon and D.E. Shaw are also among PG investors.

9. General Electric Co. (NYSE:GE): General Electric Co. is a large conglomerate providing technology, media, and financial services worldwide. GE has a 3.15% dividend yield and returned 29.00% during the past 12 months. GE recently traded at $19.04 and returned 5.66% since the beginning of this year. The stock has a market cap of $201.93B and P/E ratio of 14.88. Phill Gross, D.E. Shaw and Ken Fisher hold large GE positions.

10. DuPont (NYSE:DD): DuPont is an American company providing a wide range of science-based products and related services worldwide. DD has a 2.99% dividend yield and returned 50.32% during the past 12 months. DD recently traded at $54.85 and returned 11.62% year-to-date. The stock has a market cap of $50.94B and P/E ratio of 15.28. Jim Simons’ Renaissance Technologies holds the largest DD position among the 300+ funds we are tracking (See Jim Simons’ top stock picks here).



Disclosure: I am long MSFT, T.

Source: Investing in High Dividend Dow Stocks