With just 30 components, the Dow Jones Industrial Average (^DJI +0.63%) has historically been an excellent tool for finding foundational, blue-chip dividend stocks to build a portfolio around.
Last year, I correctly predicted that 15 Dow stocks would increase their dividends. Here's why they can do it again, some key differences between Dow income stocks and dividend-paying growth stocks, and some of the best Dow stocks to buy in the new year.
Image source: Getty Images.
Key differences among Dow dividend stocks
In addition to having consistent track records of boosting their dividends, many Dow stocks also sport high yields.
|
Dow Jones Industrial Average Component |
Dividend |
Consecutive Annual |
|---|---|---|
|
Procter & Gamble (PG +2.60%) |
2.9% |
69 years |
|
Coca-Cola (KO 0.12%) |
2.9% |
63 years |
|
Johnson & Johnson (JNJ +0.22%) |
2.4% |
63 years |
|
Walmart (WMT 1.31%) |
0.8% |
52 years |
|
McDonald's (MCD +0.11%) |
2.3% |
49 years |
|
Chevron (CVX 0.27%) |
4.1% |
38 years |
|
International Business Machines (IBM 0.97%) |
2.2% |
30 years |
|
Verizon Communications (VZ +0.64%) |
6.9% |
19 years |
|
Merck (MRK 1.74%) |
3% |
17 years |
|
UnitedHealth Group (UNH +2.03%) |
2.6% |
16 years |
|
Home Depot (HD 0.96%) |
2.5% |
16 years |
|
Microsoft (MSFT +1.53%) |
0.7% |
16 years |
|
Cisco Systems (CSCO +0.88%) |
2.2% |
15 years |
|
Apple (AAPL +0.28%) |
0.4% |
14 years |
|
JPMorgan Chase (JPM +0.39%) |
1.9% |
14 years |
Data sources: Procter & Gamble, Coca-Cola, Johnson & Johnson, Walmart, McDonald's, Chevron, International Business Machines, Verizon Communications, Merck, UnitedHealth Group, Home Depot, Microsoft, Cisco Systems, Apple, JPMorgan Chase. Yields for share prices from Jan. 7.
Investors typically gravitate toward stocks like the ones above for their stable and growing payouts and historically high yields.
Microsoft and Apple have solid track records of boosting their payouts, but they also reinvest consistent capital in their underlying businesses and engage in stock buybacks. Visa (V +0.19%) is another example of a Dow stock with a growing dividend that spends considerably more money on stock repurchases than dividends.
Buybacks can be a better use of capital than dividends if a company's share price goes up over time. Unlike dividends, which are often paid from after-tax income and then taxed to investors (known as double taxation), buybacks incur only a 1% corporate excise tax. What's more, buybacks can dramatically reduce the outstanding share count over time and accelerate earnings growth. Apple's dividend yields a paltry 0.4%, but it has doubled its dividend over the last decade and reduced its share count by nearly a third thanks to buybacks. With fewer shares to go around, buybacks boost earnings per share and give long-term investors an increasingly larger ownership stake in the business.
In this vein, it's important for investors to look at the full picture of capital returns (dividends and buybacks).
NASDAQ: AAPL
Key Data Points
Using Dow stocks to strengthen your portfolio
I expect the 15 discussed Dow stocks to boost their payouts again in 2026, given their long-term runways for earnings and free-cash-flow growth.
The weakest name on the list is UnitedHealth, which was the worst-performing Dow stock in 2025. UnitedHealth's yield has jumped from well under 2% to 2.6% due to its declining stock price. But most of UnitedHealth's issues appear solvable, although its margins could be strained over the next year or two as it adjusts its Medicare Advantage pricing structure.
Ultimately, the best Dow stocks to buy will depend on your investment objectives, risk tolerance, existing holdings, and portfolio needs.
A cyclical stock like Home Depot is a great buy for investors who believe the housing market and consumer spending can recover from lower interest rates.
Microsoft, Apple, IBM, and Cisco all offer different ways to invest in artificial intelligence (AI), with Microsoft and IBM betting big on cloud, Apple integrating AI features into its products, and Cisco through AI infrastructure.
Consumer staples and healthcare tend to be recession-resistant sectors due to steady demand even when economic growth slows. Similarly, an energy stock like Chevron can perform well during times of uncertainty if oil and gas prices rise due to geopolitical tensions.
