The Dow Jones Industrials (DJINDICES: ^DJI ) rose 238 points last week, climbing back to within 2% of its all-time record high. Throughout the past several years, dividend stocks have played a vital role in the Dow's overall performance, and last week was no exception, with the Dow's top-yielding dividend stocks all contributing to the positive week for the average. Let's take a closer look at how telecom giants AT&T (NYSE: T ) and Verizon (NYSE: VZ ) joined semiconductor stalwart Intel (NASDAQ: INTC ) and conglomerate General Electric (NYSE: GE ) in pushing the Dow higher last week.
AT&T soared 5.5% as investors stopped fretting quite as much as they have in the recent past over the competitive pressures going on in the telecom industry right now. The stock has gotten hit hard recently from efforts by Sprint and T-Mobile to challenge the leadership role that AT&T and Verizon have atop the U.S. wireless industry. But AT&T CFO John Stephens told analysts that the concern was overblown, as he remains convinced that customers want network quality more than they want lower prices, and AT&T hopes that even if it doesn't necessarily match all the price moves that its smaller rivals might make, it will still be able to improve its network and gain customers that way.
Verizon climbed just less than 2%. Unlike AT&T, Verizon has largely been staying out of the fray in the most recent round of competition among wireless carriers, counting on its broader-based network to carry the day. Investors can expect the company to take a while digesting its full takeover of its Verizon Wireless business, as Verizon recently tapped the bond market again for financing. As long as the economic expansion continues, the rise in smartphone and mobile technology should keep demand for wireless access high, and that will support Verizon and AT&T.
Intel gained almost 3%, but one of the big problems that dividend investors have with Intel is that it hasn't raised its quarterly payout in almost two years. In large part, the company has maintained its 3.5% yield only by virtue of its share price having fallen over the past two years, lagging well behind the Dow's gains over the same time period. Efforts to offer new smartphones to make a bigger splash in the mobile industry are essential to its success, but Intel hasn't seen huge gains as a result.
General Electric rose just over 1% as investors digested its announcement of a coming IPO. GE will begin divesting its Synchrony Financial retail finance business later this year, with the initial public offering expected to be followed by a split-off transaction sometime in 2015. The move will continue General Electric's trend away from finance toward its more industrial roots, but with promising businesses including health-care financing, retail credit cards, and consumer finance, Synchrony will be interesting in itself.
The Dow is famous for its dividends, and these top-yielding stocks will have to keep rising in order to help the Dow reach new record levels. Keep your eyes on these dividend giants as they seek further gains in the months to come.
Why dividend stocks are so important
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