The Dow Jones Industrials (^DJI -0.98%) are famous for giving dividend investors generous quarterly payouts, with all 30 Dow components currently paying dividends to their shareholders. But some Dow stocks are stingier than others when it comes to handing out their earnings. In particular, Visa (V 0.05%), American Express (AXP -0.84%), and Disney (DIS -1.01%) are near the bottom of the list when it comes to dividend yields among Dow stocks, yet each has the earnings power to boost their payouts dramatically. Let's take a closer look at these three Dow dividend tightwads.
Among Dow stocks, Visa comes in at the very bottom, as the only stock carrying less than a 1% dividend yield currently. The credit card network company is still in a higher-growth phase than much of the rest of the Dow, as Visa aims to extend its reach across the globe and keep up-to-date on the happenings in the electronic-payments space, which are moving forward at an accelerating pace. Yet Visa sports $3.5 billion in cash on its balance sheet, with no long-term debt, and it only pays out 17% of its earnings in dividends. Even assuming Visa needs capital for growth, it's questionable that it needs that much money, and therefore it seems likely that Visa could boost its dividend substantially without causing trouble for its cash-flow needs.
Similarly, American Express faces many of the same challenges that Visa does, and while its yield is a little higher, the 1.1% it pays is half of what the overall Dow pays on a price-weighted basis. Unlike Visa, American Express extends credit to its cardholders, and as a result, it has a huge amount of debt on its balance sheet, requiring it to be more prudent with its capital condition than Visa. Nevertheless, American Express pays out only 18% of its earnings in the form of dividends, and with the financial condition of its cardholders improving, the company's ability to pay more money out to shareholders seems only to be rising as the Dow marches higher.
Source: Disney.
Finally, Disney also sports a 1.1% yield, and it's a rarity among dividend stocks by making only a single annual payout. The company argues that doing so saves it on administrative costs, but that doesn't change the fact that Disney only pays dividends equal to 22% of its earnings. Disney has a healthy amount of debt on its books, and the company has made efforts to increase its dividends over time, with its soaring stock price simply outaccelerating its payout. With further earnings increases expeted from Disney, though, a faster boost to the dividend would help put Disney investors more at ease.
The Dow has plenty of strong dividend stocks, but even its lagging income-payers have more capacity to boost their payouts. As investors, you have the right to call for your corporate leaders to boost your dividends in order to reflect the full earning potential your companies have.
