Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.00
    +1.65 (+2.03%)
     
  • Gold

    2,241.50
    +28.80 (+1.30%)
     
  • Silver

    24.99
    +0.23 (+0.94%)
     
  • EUR/USD

    1.0791
    -0.0039 (-0.36%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2620
    -0.0018 (-0.14%)
     
  • USD/JPY

    151.3870
    +0.1410 (+0.09%)
     
  • Bitcoin USD

    70,709.66
    +1,814.13 (+2.63%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

5 Dow Dividend Stocks to Boost Yield & Safety

With the ebb and flow of news coming out of Europe set to dominate another week of investor decision making, defensive or risk-off strategies are again moving to the front of the market. There's no better example of this than the plunging 10-year Treasury note yield which has fallen from 2.4% to 2.1% in the past 2 weeks.

As a result, alternative ideas, such as one that would boost your yield by 70% (from 2.1% to 3.6%) without going bonkers on the risk-curve, appear to be gaining traction. In this case, it's a basket of 5 blue chip multi-nationals, all of which are Dow Jones Industrial Average components.

"You're getting paid double with the dividend yields of these companies than with their own (3 to 5 year) bonds," says Scott Schermerhorn, CEO & CIO of Granite Investment Advisors or Concord, NH. "I think it's a great way to grow you income when there's not many other income options out there."

Of his five yield-horses, 2 of 3 pharmaceutical companies in the Dow make the grade, including AAA/Aaa rated Johnson & Johnson (JNJ) as well as rival Merck (MRK), whose 4.7% yield is the third highest in the Dow behind telecom titans AT&T (T) and Verizon (VZ).

"I believe five years from now, J&J's stocks will be higher, and I believe they'll continue to increase the dividend over the next five years," Schermerhorn says in the attached video.

Schermerhorn sees very little risk of these companies cutting their dividends. So when combined with capital appreciation he says "you get a win-win." For the record, J&J increased its dividend in April for the 49th consecutive year.

In addition, Schermerhorn also likes 2 of the 3 Consumer Staples names that are in the Dow, including Kraft (KFT) and Procter & Gamble (PG), but not Wal-mart (WMT). Of the two, Schermerhorn likes the "20-plus percent of earnings" that Kraft gets from emerging markets and the company's plan to split its global snacks business from its North American grocery business in the New Year.

However, when pushed, he prefers P&G, which also yields 3.3%, but unlike Kraft is facing "increasing pressure on management to do something" to unlock shareholder value. He thinks a major restructuring is likely because the Ohio-based maker of Tide detergent, Pampers diapers and Bounty paper towels has "a lot of fat to cut".

Finally, Schermerhorn's lone financial pick is JP Morgan (JPM) because it is "the best managed" and we have the most confidence that CEO Jamie Dimon "will do the right thing."

Advertisement