It's been over 100 years since investors began viewing the Dow Jones Industrial Average (^DJI +1.73%) as an overall stock market barometer. However, despite its longevity, the index is deeply flawed.
The Dow Jones Industrial Average is a price-weighted index. As a result, a 1% gain for a relatively small member like Goldman Sachs will move the index higher than a 2% gain for Apple. A higher weighting for the smaller company seems bonkers when you consider Apple's market cap is more than 21 times larger.
The Dow Jones Industrial Average has one redeeming feature that makes it worth an income-seeking investor's attention: The index contains just 30 businesses from all major sectors of the economy, except for transportation and utilities. As the most powerful companies in their industries, they have a great chance of delivering steadily growing dividend payments.
At recent prices, the average dividend payer in the Dow Jones Industrial Average offers a 2.08% yield. Amgen (AMGN +1.57%), and Johnson & Johnson (JNJ +0.13%) offer yields that are far above average, plus there's a pretty good chance that they can keep raising their payouts for another decade.
1. Johnson & Johnson
Johnson & Johnson stock offers a 3.1% dividend yield at recent prices. The company has raised its dividend payout for 62 consecutive years and is in a better position to boost its payout now. Last year, the healthcare conglomerate spun off its slow-moving consumer goods segment.
NYSE: JNJ
Key Data Points
Now that Johnson & Johnson no longer sells Band-Aids or Q-tips, the company's pharmaceutical and medical technology segments are free to drive growth. Adjusted for the negative effects of a stronger dollar, second-quarter sales rose 6.6% year over year.
There's a very good chance that investors who buy Johnson & Johnson stock now will continue receiving annual payout bumps throughout the decade ahead. The company generated $19.8 billion in free cash flow over the past 12 months, but needed just 58% of this sum to meet its dividend obligation.
While sales of its COVID-19 vaccine collapsed in 2024, its blood cancer therapy, Darzalex, is more than making up the difference. Second-quarter Darzalex sales soared 21% year over year at constant-currency rates to an annualized $11.5 billion and could rise much further. In July, the Food and Drug Administration (FDA) approved a new Darzalex-containing combination treatment for newly diagnosed multiple myeloma patients.
2. Amgen
Amgen didn't even exist when J&J began making annual dividend payout increases. The biotechnology pioneer has only raised its dividend for 12 consecutive years. At recent prices, it offers a 2.8% yield.
NASDAQ: AMGN
Key Data Points
But what Amgen's dividend program lacks in history, it makes up for with a rapid growth rate. The drugmaker's payout has risen a whopping 269% over the past decade.
Amgen's top-selling drug, Enbrel, is an anti-inflammatory medication that was first approved by the FDA in 1998. Second-quarter sales of the aging anti-inflammatory injection slid 15% year over year to $902 million, which works out to 15.4% of total revenue.
Sinking Enbrel sales are a headwind that Amgen is more than capable of overcoming with soaring sales of recently launched treatments. The company has 12 products that grew sales by a double-digit percentage in the second quarter. As a result, total second-quarter sales soared 20% year over year.
Amgen's growth portfolio got even bigger in May. The FDA approved Imdelltra for the treatment of small-cell lung cancer. In the study leading to its approval, Imdelltra shrank tumors for 40% of patients, even though all had relapsed or failed to respond to their first line of treatment.
With a large lineup of relatively young products, there's a chance Amgen can more than triple its dividend payout again in the decade to come. Adding some shares to a diversified portfolio now is a smart move for most income-seeking investors.
