The Dow Jones Industrial Average (DJINDICES: ^DJI) is comprised of 30 industry-leading components that serve as representatives of the U.S. economy. These components are sought after by investors looking to generate dividend income. While the index has a rich history, it has evolved over time to include technology companies, which have contributed to its recent impressive gains. Even traditionally stable companies like Coca-Cola, Home Depot, and McDonald’s have seen significant growth in recent months, helping the index reach new all-time highs.
However, not all components of the Dow offer high yields or are reliable dividend stocks. Boeing, for example, had to suspend its dividend due to various challenges. Tech giants like Microsoft, Apple, and Salesforce have yields below 1%, and Amazon does not pay dividends.
Among the highest-yielding stocks in the Dow are Johnson & Johnson (NYSE: JNJ), Dow (NYSE: DOW), and Chevron (NYSE: CVX). Investing $2,500 in each of these stocks would yield an average of 4.2%, generating at least $300 in passive income annually. Here’s why these three dividend stocks are worth considering for investment:
J&J has faced significant challenges recently
Johnson & Johnson (J&J) is a Dividend King with a history of 62 consecutive years of dividend increases. While the company has been considered a reliable source of passive income, it has encountered challenges in recent years, impacting its stock price.
J&J played a key role in COVID-19 vaccine development, initially benefiting from this. However, declining demand for the vaccine has posed challenges for the company. Additionally, the spinoff of J&J’s consumer health business in August 2023 has led to changes in its structure, affecting its stability as a dividend stock. Furthermore, J&J has been dealing with lawsuits related to its talc-based products.
Despite these challenges, J&J is poised for a turnaround. The company has been posting strong results and is expected to support dividend raises in the future. With a yield of 3.1%, J&J offers an attractive option for income investors.
Dow presents opportunities for growth
Dow, a chemical company, has three key segments and has faced challenges due to fluctuations in global demand and supply. While its revenue and margins have declined recently, Dow is positioned for earnings growth next year. The company’s focus on new production plans and low-carbon efforts could drive future success.
Despite its performance volatility, Dow has been a reliable income stock since its spinoff in 2019. With a yield of 5.2%, Dow is one of the highest-yielding stocks in the Dow Jones. While it has not raised its payout since the spinoff, Dow’s capital return program includes stock repurchases to benefit shareholders.
Chevron offers stability and high yield
Chevron, an energy company, has a diversified business and a track record of dividend increases for 37 consecutive years. With a yield of 4.3%, Chevron is among the highest-yielding stocks in the Dow Jones. The company’s strong balance sheet and commitment to dividend raises make it a solid choice for passive income investors.
If you are considering investing in Johnson & Johnson, it’s important to note that the Motley Fool Stock Advisor has identified other stocks with potential for significant returns. While J&J has its strengths, exploring other investment options may lead to better returns in the long run.
Overall, Johnson & Johnson, Dow, and Chevron are attractive dividend stocks with the potential to generate passive income for investors.
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