Dividend And Payout Ratios: Reviewing 6 'Real' Dow Industrials

 |  Includes: BA, CAT, DD, GE, MMM, UTX
by: Richard Bloch

After publishing some charts on the dividends and payout ratios for six of the consumer-oriented stock in the Dow Jones Industrial Average, I decided to create some similar charts for the industrial stocks.

I call these the “real” Dow Jones Industrials. After all, most of the stocks in the Dow aren’t really in the industrial sector at all, but these six stocks are the ones I view as most tied to industrial activity.

Just to recap, the payout ratio represents the percentage of earnings returned to shareholders as dividends. Investors often view higher payout ratios as a warning sign that a downturn in earnings could mean the company might not raise its dividend in future quarters – or even reduce its payout.

So here are charts that show both the dividend payments (with scale at right) and payout percentage (with scale at left) for 6 Dow Industrials. I looked up the payout percentages for each of these stocks at ValueLine.

Dupont (NYSE:DD)

Current Dividend Yield 4.10%


Current Dividend Yield 3.10%

Dupont has not raised its dividend for several years. Given that the company probably paid out too much money earlier in the decade in percentage terms shows why this might be the case. To a certain extent, you can see a similar pattern in 3M’s payout percentage, although the company has managed to raise its dividend.

Boeing (NYSE:BA)

Current Dividend Yield 2.80%

Boeing’s payout percentage has fluctuated widely, and while the dividend was raised earlier in the decade, it has not grown significantly since 2008.

Caterpillar (NYSE:CAT)

Current Dividend Yield 2.50%

Except for a spike in 2009, Caterpillar has generally been conservative in keeping its payout percentage below 50%. While dividend growth has stalled somewhat, the company has managed to raise its payout over the past few years.

United Technologies (NYSE:UTX)

Current Dividend Yield 2.70%

In terms of payout percentage, United Technologies’ ratio has been well under 50% for the last decade. And the payments themselves are up 4-fold over the decade. This chart makes me wish I owned UTX.

General Electric (NYSE:GE)

Current Dividend Yield 3.90%

Is this stock really an industrial? To some extent, yes. But the company’s fortunes tended to follow the bank stocks during the financial crisis given the exposure of its GE Capital business. The payout percentage is certainly lower than before the 2008 downturn, but note that the dividend payments were slashed, too.

I own three of these stocks, Dupont, Caterpillar, and Boeing. Based on these charts, I wish I owned United Technologies, but I’m kind of glad I steered clear of GE.

Disclosure: I am long DD, BA, CAT.