High dividend yields can be a warning sign for investors. Yields generally correlate negatively with stock price movements, after all, so higher yields often reflect a business’ underperformance and investors’ lack of confidence in its rebound potential. There are real dangers, in other words, involved in trying to boost your returns by reaching for yield.
One popular tactic that investors use in an attempt to minimize those risks is to focus on high-quality companies that might just be going through rough patches. That’s the thrust behind the “Dogs of the Dow” strategy, which involves purchasing the 10 highest-yielding stocks in the Dow Jones Industrial Average (DJINDICES: ^DJI) at the start of the year and holding onto them till the start of the next. Following that strategy has a two-fold benefit: It puts you into stocks with unusually high dividend yields, and it keeps you away from stocks that have rallied so much that they may carry potentially excessive premiums.
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Here’s a look at the Dow’s 10 highest dividend yields as we head toward the end of 2025. Keep in mind that an investor could earn a 1.8% yield by owning an index fund that tracked the whole 30-company index.
|
DJIA Dividend Payer |
Yield |
DJIA Dividend Payer |
Yield |
|---|---|---|---|
|
Verizon Communications (NYSE: VZ) |
6.7% |
Coca-Cola |
3% |
|
Chevron (NYSE: CVX) |
4.3% |
Amgen |
2.8% |
|
IBM (NYSE: IBM) |
3.2% |
Cisco Systems |
2.8% |
|
Merck & Co. |
3% |
Procter & Gamble |
2.4% |
|
Johnson & Johnson |
3% |
3M |
2.4% |
Source: Yahoo! Finance.
Verizon looks like the most tempting income-investment option, with a yield that’s approaching 7%. The telecom giant hasn’t simply trailed the market in 2024, though. Its shareholders have been losing ground for years. Many factors have combined to keep its total returns low, including the fact that consumers are holding onto their smartphones for much longer these days. It’s also difficult to boost sales in the competitive and largely saturated market for wireless and broadband services.
Most Wall Street pros expect Verizon’s revenue to rise by less than 1% this year and by less than 2% in 2025. Still, those figures don’t describe a broken business model, and Verizon is likely to continue paying hefty dividends in the coming years.
Chevron has a lot going for it as an income investment. The oil company’s highly efficient business produced nearly $10 billion of operating cash flow last quarter despite falling gas prices. It returned $8 billion to shareholders in the period as well — $3 billion via dividend payments and the remainder through stock buybacks.
