13 Dow Components Yielding At Least 3% Going Into The Final Trading Week

by: Zvi Bar

The Dogs of the Dow theory presumes that investing in the 10 Dow Industrial components that enter a calendar year with the highest yields is a prudent investing strategy. The strategy presumes the Dogs are lagging and that they might provide capital appreciation as well as an above-average income stream.

The theorists note that these components should all be relatively strong companies, by their inclusion in the Dow. The 2011 Dogs all entered the year with a yield of at least three percent, and for most of the first half of the year only ten or eleven dow components offered a yield above three percent. Since the market began to sell off, more and more dow components have crossed this benchmark. Many have also increased their dividends, and some may announce increases during the fourth quarter.

Generally, some companies stay Dogs, while some others stop becoming Dogs and an equal amount become new Dogs each year. Today, there are 13 companies in the Dow 30 that yield over three percent, while only three yield over four percent: AT&T (T), Merck (MRK) and Verizon (VZ). These companies were all 2011 dogs and appear to be virtually guaranteed to be 2012 dogs. The other seven spots, though, are far more open between the ten dow components now yielding between three and four percent.

Below, listed in alphabetical order, are the ten Dow Industrial components that yield between three and four percent. I have also provided their current yields and a chart of their recent performance.

(Click charts to enlarge)

Chevron (CVX)

• Yield: 3.1%

E.I. du Pont de Nemours (DD)

• Yield: 3.6%

General Electric (GE)

• Yield: 3.8%

Intel (INTC)

• Yield: 3.5%

JPMorgan Chase (JPM)

• Yield: 3.1%

Johnson & Johnson (JNJ)

• Yield: 3.5%

Kraft Foods (KFT)

• Yield: 3.1%

Microsoft (MSFT)

• Yield: 3.1%

Pfizer (PFE)

• Yield: 3.7%

Procter & Gamble (PG)

• Yield: 3.2%

Some of the final 2012 list-making will depend upon market activity during this last week of the year, but DD, GE, INTC, JNJ and PFE appear poised to be included along with T, MRK and VZ. Of these companies, only GE was not a 2011 dog. The remaining two spots are far less clear, between the five other listed companies, all of which have a yield in the low 3s. The only 2011 dog that appears completely out of the running for the 2012 list, barring some significant market volatility, is McDonald's (MCD), which is now yielding 2.8% and at a historic high.

One great thing about Dow components is that they are reasonably familiar to the average American, and they will find it easy to obtain news and information on them. Further, the companies are highly liquid, though high valuation volatility is present.

Disclosure: I am long GE, KFT, INTC.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.