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Investors are concerned about a Lehman-like collapse in Europe and are spooked by the S&P’s downgrade of America’s credit rating. DJIA went down by 5.6% and the S&P 500 index lost 6.7%. It isn’t a surprise that the S&P 500 index underperformed the DJIA during this downturn. The constituents of DJIA are larger, more stable companies with larger dividend payments. High dividend stocks perform better than other stocks in the long-run.

We also prefer high dividend stocks over long-term treasuries. The 10-year treasury bond has a 2.3% yield to maturity at this moment. The bonds are performing spectacularly in this down market, but over the next 10 years they aren’t good investments. An investor who bets $100 on a high dividend stock that yields more than 5% will perform better than the 10-year treasury holders if the high dividend stock doesn’t go down more than 25% over the next 10 years. We don’t think that’s very likely for a diversified portfolio of high dividend yielding stocks. That’s why we like high dividend stocks.

Here's a long list of Dow stocks, ranked by their annualized dividend yields.

Company

Ticker

YTD Returns

Yield

AT & T

(NYSE:T)

-1.6%

5.91

Verizon

(NYSE:VZ)

-3.8%

5.57

Merck & Co Inc.

(NYSE:MRK)

-15.0%

4.55

Pfizer Inc.

(NYSE:PFE)

-1.8%

4.46

Intel Corp.

(NASDAQ:INTC)

-1.9%

4.18

Johnson & Johnson

(NYSE:JNJ)

0.6%

3.49

DuPont

(NYSE:DD)

-10.3%

3.47

Kraft Foods Inc.

(KFT)

8.9%

3.33

General Electric Co.

(NYSE:GE)

-14.4%

3.33

Procter & Gamble Co.

(NYSE:PG)

-5.6%

3.32

Home Depot

(NYSE:HD)

-16.3%

2.84

Travelers Companies Inc.

(NYSE:TRV)

-11.7%

2.83

Chevron Corp.

(NYSE:CVX)

0.4%

2.79

Mc Donald Corp.

(NYSE:MCD)

8.7%

2.75

Coca Cola Co.

(NYSE:KO)

0.4%

2.73

Average

-4.2%

The high dividend constituents of the DJIA performed much better than the S&P 500’s 9.9% loss in 2011. These 15 stocks outperformed most index funds by 5.7 percentage points. T, VZ, MRK, PFE, INTC, and JNJ are the highest yielding stocks in the DJIA. The 15 stocks with the lowest dividend yields lost 14% so far in 2011, underperforming the SPY by 4.1 percentage points. The four stocks with the lowest dividend yields lost 26% or more in 2011.

Company

Ticker

YTD Returns

Yield

Wal-Mart Stores

(NYSE:WMT)

-8.0%

2.63

3M Company

(NYSE:MMM)

-7.8%

2.48

Boeing Co.

(NYSE:BA)

-9.0%

2.39

Exxon Mobil Corp.

(NYSE:XOM)

-3.0%

2.39

Microsoft Corp.

(NASDAQ:MSFT)

-11.2%

2.38

United Technologies

(NYSE:UTX)

-10.5%

2.37

Caterpillar Inc.

(NYSE:CAT)

-10.6%

1.96

IBM

(NYSE:IBM)

14.2%

1.63

JP Morgan Chase

(NYSE:JPM)

-18.7%

1.6

American Express Co

(NYSE:AXP)

1.5%

1.53

Walt Disney Co.

(NYSE:DIS)

-11.9%

1.14

Hewlett Packard Co.

(NYSE:HPQ)

-26.4%

1.1

Alcoa Inc.

(NYSE:AA)

-25.9%

0.94

Cisco Systems Inc.

(NASDAQ:CSCO)

-30.6%

0.8

Bank of America Corp.

(NYSE:BAC)

-51.1%

0.49

Average

-14.0%

Here are the top dividend players.

AT&T is a large telephone and television services provider. T has a 5.9% dividend yield and lost 1.6% year-to-date. The stock has a market cap of $164B and P/E Ratio of 8.1. Phil Gross holds nearly $400M of T. Cliff Asness, George Soros, D.E. Shaw and Jim Simons are also among T investors.

Verizon is a global telecommunications company. VZ has a 5.6% dividend yield and lost 3.8% since beginning of this year. The stock has a market cap of $94B and P/E ratio of 14.1. Gross' Adage Capital had nearly $150 Million of VZ at the end of March.

Merck is one of the largest pharmaceutical companies in the world. MRK has a 4.6% dividend yield and lost 15% year-to-date. The stock has a market cap of $92B and P/E ratio of 57. Ric Dillon holds the largest MRK position among the 300+ funds we are tracking.

Pfizer Inc. is another leading pharmaceutical company in the world. PFE has a 4.5% dividend yield and lost 1.8% in 2011. The stock has a market cap of $132B and P/E ratio of 16. David Einhorn has the largest PFE position among the funds we are tracking, holding more than $500 million of the stock. Ken Fisher, Lee Ainslie, David Tepper and Gross are prominent PFE investors.

Intel Corp. is a global technology company that manufactures microprocessor products. INTC has a 4.2% dividend yield and lost 1.9% since the beginning of this year. The stock has a market cap of $106B and P/E ratio of 9.2. Fisher, Paul Ruddock, Simons and Gross are among INTC investors.

Johnson & Johnson is a multinational company that provides consumer healthcare and pharmaceutical products. JNJ has a 3.5% dividend yield and returned 0.6% year-to-date. The stock has a market cap of $168B and P/E ratio of 14.6. Warren Buffett is the largest holder with a $2.5 billion position. JNJ is one of the most popular stocks among hedge funds.

Source: A List of High Dividend Dow Stocks