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There are some investors who strictly invest in mega-cap blue chip stocks. Additionally, among the 300+ hedge funds we track, most have at least one or more Dow stocks in their portfolios. In this article, we are going to focus on the top 10 high-dividend Dow stocks. All companies have dividend yields at least 50% higher than the 10-year Treasury bond’s yield. In other words, these stocks have a dividend yield of at least 3%. Market data sourced from Finviz.

Ticker

Company

Dividend Yield

52-week return

T

AT&T, Inc.

5.93%

7.85%

VZ

Verizon

5.22%

11.49%

MRK

Merck & Co. Inc.

4.37%

8.73%

PFE

Pfizer Inc.

4.08%

23.61%

GE

General Electric Company

3.65%

4.02%

DD

DuPont

3.56%

-4.82%

JNJ

Johnson & Johnson

3.52%

6.30%

INTC

Intel Corporation

3.33%

25.87%

PG

Procter & Gamble Co.

3.16%

5.90%

KFT

Kraft Foods Inc.

3.09%

24.21%

During the past 52 weeks, these 10 stocks generated an average return of 11.32%, beating the 2.36% return of the S&P 500 (NYSEARCA:SPY) index. Only one stock – DD – underperformed the market in the past 52 weeks, while four stocks – VZ, PFE, INTC, and KFT – had double-digit returns in that period.

AT&T Inc has the highest dividend yield among the stocks listed above. The telecom company has a dividend yield of 5.93% and returned 7.85% during the past 52 weeks, beating the market by over 5 percentage points. It has a market cap of $176B and a relatively low P/E ratio of 15.07. At the end of September, there are 27 hedge funds that reported owning T shares in their 13F portfolios. For example, Cliff Asness’ AQR Capital Management disclosed to own $100+ million worth of T shares.

One of the biggest competitors of AT&T, Verizon Communication Inc, also has a dividend yield of over 5%. VZ generated a double-digit return of 11.49% during the past 52 weeks, versus 2.36% for SPY. The stock has a market cap of $109B and a P/E ratio of 15.39. It is also very popular among hedge funds. There are 33 hedge funds with VZ positions in their portfolios at the end of the third quarter of 2011. For example, Louis Bacon’s Moore Global Investments had $63 million invested in VZ. Cliff Asness’ AQR Capital Management had $60 million worth of VZ shares as well.

The best-performing stock on the list above is Intel Corporation, which gained 25.87% over the past 52 weeks. The $129 billion market cap stock has a dividend yield of 3.33% and a low P/E ratio of 10.93. As of September 30, 2011, there are 42 hedge funds with INTC positions in their portfolios, including Ken Fisher’s Fisher Asset Management, Jim Simons’ Renaissance Technologies and Warren Buffett’s Berkshire Hathaway.

Other mega-cap Dow Jones index stocks that pay 40% more than 10-year Treasury include Pfizer Inc (NYSE:PFE), General Electric Company (NYSE:GE), Johnson & Johnson (NYSE:JNJ), and Procter & Gamble Co (NYSE:PG). High-dividend stocks usually have better performance, especially during down markets. We do not like the Fed’s expansionary monetary policies. We are concerned that these policies will lead to inflation in the near future. Therefore, stocks with high dividends are better investments than long-term treasury bonds as high-dividend stocks can protect investors from inflation. We strongly recommend investors play defensively by investing in high-dividend stocks.

Source: 10 High-Dividend Dow Stocks That Pay 50% More Than 10-Year Treasuries