At the end of every year, we’re presented with the top Dogs of the Dow. Made up of the hardest-hit Dow stocks, which also pay out hefty dividend yields, you buy the Dogs at the start of the year, and cash out at the end of the year with hopeful wins in hand.
In 2023, the Dogs of the Dow returned about 10.1%, as compared to the 14.4% gains on the overall Dow Jones Industrial Average. The 2022 Dogs of the Dow did beat the major indices. In fact, while the Dogs of the Dow stocks fell 1.6% on the year, once you add in the dividend payouts, the Dogs returned 2% on the year. While 2% may not sound like a big win, consider that, in 2022, one of the worst years on record since 2008, the Dow Jones lost about 9%.
As for 2024, here’s how the Dogs of the Dow have done year to date:
- Goldman Sachs (NYSE:GS) ran from about $380 to $387, and yields 2.84%
- Johnson & Johnson (NYSE:JNJ) ran from $156 to $159.52, and yields 2.98%
- Coca-Cola (NYSE:KO) has been about flat at $59, yielding 3.26%
- Amgen (NASDAQ:AMGN) fell from $285 to a low of $273.75, and yields 3.29%
- Cisco (NASDAQ:CSCO) fell from about $50 to $49.50, yielding 3.23%
- IBM (NYSE:IBM) jumped from about $160 to $195.95, yielding 3.39%
- Chevron (NYSE:CVX) ran from about $148 to $149.88, yielding 4.35%
- Dow (NYSE:DOW) ran from about $54 to $56.61, yielding 4.95%
- 3M Company (NYSE:MMM) fell from about $107 to $93.90, yielding 6.43%
- Verizon (NYSE:VZ) ran from $37.10 to $39.51, yielding 6.73%
Of those, we expect these three top Dogs of the Dow of 2024 to run even more.
IBM (IBM)
Soaring with the artificial intelligence (AI) boom, International Business Machines could see higher highs. Helping, the company’s WatsonX AI platform is its newest AI and data platform that allows, “AI builders to train, test and deploy generative AI capabilities powered by foundation models,” according to TechTarget.com.
Better, IBM is seeing massive improvements to productivity thanks to the AI boom. And, as IBM noted late last year, “If you leverage AI correctly, there’s probably $10 trillion of productivity that will be reaped by companies and governments over the next 10 years,” as quoted by CNBC.
Even better, the company just forecast full-year revenue growth in the mid-single digits, which is higher than expectations for 2.8%. It also guided for stronger free cash flow of $12 billion for the year, driven by higher profitability.
“Investment firm BofA labeled the company’s free cash flow guide as ‘the standout metric’, comfortably beating its expectations of $11 billion – $11.5 billion. For UBS, the company’s full-year free cash flow outlook was a positive surprise compared to its estimate of $11 billion,” as noted by Seeking Alpha.
Verizon (VZ)
Verizon started the year off well but from here, I’d initially like to see VZ challenge $43 again. Helping, Verizon just declared a 66.5 cent quarterly dividend, which is payable May 1 to shareholders of record as of April 10.
That dividend also appears to be safe. Late last year, company CEO Hans Erik Vestberg said Verizon’s “dividend coverage is very healthy. Year-to-date our free cash flow dividend payout ratio is approximately 56%, a significant improvement from a year ago,” as quoted by Barron’s.
The company also just forecast an adjusted EPS range of $4.50 to $4.70 for the full-year. That’s higher than expectations, and is being supported by an impressive increase in wireless subscribers with net additions up about 400,000 in the fourth quarter. Even better, its free cash flow (FCF) is on the rise, with its FCF up to $18.7 billion for 2023 from $14.1 billion in 2022.
Coca-Cola (KO)
Since the year began, Coca-Cola has been trading sideways, bouncing around in a tight channel between $59 and $61. Now at the lower range of the channel, I expect for the stock to again pivot higher immediate term. Longer term, I’d like to see KO to break above resistance around $62, with a potential test of $64.
Helping, the company just raised its dividend to 48.5 cents, which is payable on Apr. 1 to shareholders of record as of Mar. 15.
Two, KO is still one of Warren Buffett’s favorite stocks. Three, even though it’s been forced to raise prices, its sales are still strong. It fourth quarter EPS of 49 cents came in in-line. Revenue of $10.88 billion — up about 7% year over year — beat by $150 million. And four, analysts at JP Morgan just raised their price target to $66, with an overweight rating.
As noted by TheFly.com, “The company reported another strong quarter with better than expected sales performance and strong gross margin, the analyst tells investors in a research note. Most importantly, the 2024 outlook was better than anticipated,” added JP Morgan.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
