The Dow Jones Industrial Average (^DJI 0.02%) had a banner year in 2013. The blue-chip index gained 3,473 points, or 26.5%, to close out the year at 16,567 -- an all-time high. Thirty-three tickers claimed Dow membership at some point in 2013, and all 33 pay regular dividends. Among all these high-quality dividend stocks, where did the dividends make the biggest difference?
Reinvesting AT&T's dividends in 2013 boosted your returns from 4.3% to 9.7%, for a 5.4% spread. Verizon and Intel both saw 5% higher returns when accounting for dividend reinvestments, though Verizon only gained 13.6% in straight-up share price returns while Intel mustered 25.9% higher prices in 2013.
But that's not the only way to do this dividend math. I could also point out that AT&T's dividend-powered return was more than twice the plain share price return, for a 126% relative boost. In these terms, Caterpillar (CAT -1.09%) stock crawled so close to the breakeven line that its modest 2.1% dividend improvement represented a 155% boost.
Don't take this stunning return-booster as a massive "buy" sign on Caterpillar. The heavy-equipment maker's dividend-powered 3.4% return might be 155% higher than the plain 1.3% share price gain, but Caterpillar investors are cursing both of these numbers. Yes, it's a massive improvement in relative terms, but the stock still trailed the Dow in a big way no matter how you slice it.
Don't be afraid to double-check the math if something looks too good to be true.
A careless headline might make you think that Caterpillar's dividend made you 155% richer in 2013, when the reality is that the dividend only softened the blow of a very disappointing year by a couple of percentage points. AT&T and Verizon are still the true dividend kings of the Dow, with Intel stepping up from behind, and three of these four stocks still trailed the Dow's dividend-adjusted returns in 2013. Only Intel lost to the Dow in plain share price returns but edged out the index when accounting for dividends.