The Dow Jones Industrial Average (INDEX: ^DJI ) is a pretty unique index. Beyond the hand-picked nature of the list and its status as the benchmark for the market's overall health, every single one of the Dow's 30 components pays a dividend today. That's remarkable when you consider that dividend payments aren't strictly required to make it onto the list, and are also a fairly new phenomenon. For example, networking giant Cisco Systems (Nasdaq: CSCO ) joined the index in 2009 but announced its first dividend in the spring of 2011.
Some Dow dividends are of higher quality than others. Fellow Fool John Maxfield walks you through the Dow's highest dividend yields; I'm here to highlight the fastest-growing payouts.
Hares and tortoises
Yes, Virginia, there is a difference. Four of the elite 30 didn't grow their dividends at all over the last 12 months and another 11 juiced their payouts by less than 10%. That's fully half of the index growing payouts at single-digit rates, or not at all.
Cisco slides into the top position by default. Since Cisco has been sending dividend checks for just five quarters now, year-over-year comparisons don't really make sense. The company has paid out $0.20 per share over the last 12 months versus only $0.06 per share in that very first quarter -- an insane 333% apples-to-oranges jump.
But Cisco did boost its quarterly payout from $0.06 to $0.08 per share last quarter -- a very respectable 33% increase that still lands in the Dow's Top 5. And I like where this company is going in an ever more connected world. Long story short: It's hard to go wrong with Cisco these days.
On the other hand...
The second-largest jump came from troubled megabank JPMorgan Chase (NYSE: JPM ) -- another special case. JPMorgan quintupled its payout at about the same time as Cisco started its dividend policy, making direct comparisons tricky once again.
The company recently suspended its share buyback program in order to protect the generous 3.6% dividend yield. CEO Jamie Dimon is under fire for JPMorgan's dangerous trading practices. Cisco's dividend may be new, but at least it's predictable -- I'd keep a wary eye on JPMorgan's payout policy as the current scandal shakes out.
That brings us to a tie for third and fourth place: Walt Disney (NYSE: DIS ) and Hewlett-Packard (NYSE: HPQ ) both boosted their dividends by 50%. Beyond their lockstep increases, these two stocks couldn't be more different.
One up, one down
Entertainment powerhouse Disney is the walking definition of stability. Come hell or recession, the House of Mouse takes a licking and keeps on ticking. In his book Strategic Risk Taking, Professor Aswath Damodaran holds Disney up as a blueprint for making money in a weak economy. The stock has soared 21% over the last year, and today's dividend accounts for just 21% of net income -- there's plenty of headroom for further payout growth.
In stark contrast, HP is a study in misery. That stock plunged almost 40% in the past 12 months, crushed by top-level management turnover and disappointing results. The company devotes a reasonable 19% of net income to fund the dividend -- but that's up from just 8% a year ago as the bottom line dwindles. And I don't see an end to this sad state of affairs anytime soon. This dividend might have to backpedal in the next few years.
Cisco and Disney look like tremendous plays for income investors today, but I'd stay away from JPMorgan and Hewlett-Packard. If you love rock-solid dividend champions, be sure to take a look at these nine superstar dividend payers -- including five Dow members we didn't discuss here. This special report is yours for the asking but only for a limited time. Just click here to get your copy right away.