One simple way of putting it is: “The concept that asset prices often revert back to their typical values or averages over a period of time is a fundamental principle in investing.
The fundamental idea behind the “Dogs of the Dow” investment technique is to select the 10 companies from the Dow Jones Industrial Average (with a current yield of approximately 0.53%) that offer the highest dividend yields at the start of each year, and then hold these stocks throughout the year.
Instead of confining this strategy exclusively to the Dow, just 10 stocks, or a particular season, consider purchasing the top three dividend-yielding stocks from the S&P 500 (S&P 500: 0.32%) at present.
1. Dow
The Dow Corporation, not associated with the Dow Jones Industrial Average, stands as the highest-yielding “laggard” among the S&P 500 companies, offering a significant forward dividend yield of approximately 9.9%.
This exceptional return isn’t due to Dow significantly boosting its dividend; instead, it’s been stagnant for years. Regrettably, the primary cause of Dow’s elevated dividend yield is a steep decline in its stock price, which has dropped by almost 50% from its peak over the past year.
Multiple elements have contributed to Dow’s decline. Some of these factors stem from broader economic conditions, such as rising inflation worries and reduced consumer spending. Additionally, there are industry-related issues at play. For instance, Dow attributed the challenging market circumstances within the chemical industry as a reason for closing three upstream assets in Europe.
It might not be wise to invest heavily in the Dow Jones right now, as the company may need to reduce its dividend payments. If this happens, some investors might choose to withdraw their investments, leading to a further drop in Dow’s share price. However, I wouldn’t rule out the possibility that after the situation stabilizes, there could be a subsequent recovery for Dow.
2. LyondellBasell Industries NV
LyondellBasell Industries NV, represented by the ticker symbol LYB (-0.03%), stands as the second-highest dividend payer among the S&P 500 companies. The anticipated dividend return for this stock is exceptionally high at 8.71%.
In the same vein as Dow, I’ve noticed that LyondellBasell, being a chemical company, has experienced a significant decline in its shares over the past year, much like Dow. However, unlike Dow, a substantial part of LyondellBasell’s appealing dividend yield can be attributed to its recent years of increased dividend payouts.
It’s not surprising that economic factors on a large scale and difficulties within the chemical industry have been significant reasons behind LyondellBasell’s asset divestment during the last year. Specifically, global excess production capacity has posed a considerable obstacle for LyondellBasell.
Despite its appealing dividend, I’m hesitant about investing in LyondellBasell right now because it seems that the company’s issues might linger for some time.
3. ConAgra Brands
ConAgra Brands holds the third position among the top dividend payers in the S&P 500, boasting a projected dividend yield of 7.27%. This well-known brand specializing in consumer packaged foods is known for its substantial dividends.
For ConAgra, it’s a fresh set of lyrics, yet the melody remains unchanged. Over the past year, their stock has experienced a substantial drop, marking a downturn that started in early 2023. Prior to this, ConAgra had been raising its dividend consistently for quite some time. However, since its last increase in mid-2023, the company has chosen to maintain its dividend at the same rate.
For ConAgra, managing inflation has become a significant concern given its portfolio of popular brands such as Banquet, Birds Eye, Healthy Choice, and Marie Callender’s. Furthermore, the company has faced hurdles in its supply chain and encountered unfavorable public opinion regarding processed foods.
In a positive light, ConAgra’s shares are currently trading at less than ten times their projected future earnings. Although just three out of eighteen analysts surveyed by LSEG in July recommended buying the stock, the average forecast for ConAgra’s price over the next year suggests a potential increase of approximately 30%.
Although the currently depressed stock might seem appealing, I have reservations about its quality at this moment in time. I believe there are other investment options that provide greater dividend returns and a more promising outlook for both the short and long term.
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2025-07-17 16:51