Did the Dow's Dividends Improve Today?

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) just became a little less hospitable to income investors -- at least on the face of it. Today's makeover introduced three stocks with stingy dividend yields, lowering the premier index's average yield just a smidgen.

Here's how the incoming and outgoing Dow tickers compare in terms of dividend yields:

HPQ Dividend Chart

HPQ Dividend data by YCharts.

All three of the new names rank in the bottom five of the Dow's current dividend yields. Their average yield sits at 1% versus the 1.5% average of the three recent departures.

It's not a huge difference, and Hewlett-Packard is the only one of these six stocks that pays anything close to the Dow's 2.6% average. You'd be a rare income investor if you bought any of these tickers with an eye to their dividend-paying prowess above all else.

That said, the new tickers do bring a certain je ne sais quoi to the table for dividend investors. I'm talking about growing payouts.

Visa's (NYSE: V  ) dividend history may be short, but it's also pretty sweet. Those quarterly dividend checks have more than tripled in size since the first were sent out in 2008. These boosts largely kept pace with Visa's share prices, which also tripled over the same period. So the yield may look a bit light, but it's for all the right reasons -- shareholders rarely complain about stock prices rising too fast.

Nike (NYSE: NKE  ) tells a similar story. Both share prices and dividend payouts per share have just about doubled in five years, leaving little for shareholders to complain about.

The black sheep here is Goldman Sachs (NYSE: GS  ) in a very loose sense. The financial giant was hit as hard as anyone by the 2008 panic, but Goldman never resorted to slashing its payouts. Sure, the 33% boost to the first dividend of 2009 turned out to be a stretch and had to be dialed back right away, but Goldman has been paying record-level dividends since the end of 2012.

Ejected tickers Alcoa and Bank of America can't match those claims. Both stocks pay out a fraction of their pre-panic dividends and seem unlikely to return to full income-generating health anytime soon.

So the Dow just lowered its immediate dividend payouts a little bit, but the new names look far more likely to reward patient investors than the old tickers do. All things considered, that's not a bad trade at all.

How should dividend investors look at the Dow?
Income investors must always weight current yields against long-term policy trends. If you're looking for some strong long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2649831, ~/Articles/ArticleHandler.aspx, 10/1/2014 4:57:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement