As a follow up to last week’s post covering the top REIT dividend growth stocks I wanted to highlight which DOW stocks have the best history of dividend growth. All 30 DOW stocks pay a dividend although some yields are quite low.
Just about every stock in this index is showing at least some positive dividend growth except for BAC and AXP. Only 7 of these stocks are dividend aristocrats and less than half have 15 years or more of consecutive dividend increases. I consider consecutive annual increases to be more important than average dividend growth rates but both are important. 16 companies in the DOW have 5 year dividend growth rates of 7% or more. I give stocks with a dividend growth rate of 7% or more top preference when ranking stocks.
3 Standouts
I tried to narrow down this list to just 3 standouts. So considering a relatively lower P/E ratio, yield over 2%, 20 (almost) years of consecutive dividend increases and 5 year dividend growth rates of 11% or more I found these three stocks. Coincidentally they each have a solid outlook for the future based on current valuations or growth:
McDonald’s (MCD) – Trading at around 18x with a yield of 3.1% and a 5 year dividend growth rate of 13.8%. MCD has increased its dividend for 36 years in a row.
Wal-Mart Stores (WMT) – Trading at 15x with a yield of 2.2% and a 5 year dividend growth rate of 12.5%. WMT has increased its dividend for 37 years and was one of the few stocks that showed as undervalued in the average yield post.
United Technologies (UTX) – Trading at 17x with a yield of 2.3% and a 5 year dividend growth rate of 11.6%. UTX has increased its dividend for 19 years.
The Numbers
Here is the chart for all DOW30 stocks:
| Company | Symbol | P/E | Yield | 5yr Div Growth % | Yrs of Div Increases |
|---|---|---|---|---|---|
| Procter & Gamble | PG | 19.38 | 2.98 | 10.79 | 59 |
| 3M | MMM | 17.15 | 2.25 | 4.21 | 54 |
| Coca-Cola | KO | 21.37 | 2.56 | 8.45 | 50 |
| Johnson & Johnson | JNJ | 22.94 | 2.95 | 8.18 | 50 |
| Wal-Mart Stores | WMT | 15.06 | 2.29 | 12.56 | 37 |
| McDonald's | MCD | 17.95 | 3.11 | 13.86 | 36 |
| Exxon Mobil | XOM | 9.18 | 2.59 | 9.74 | 30 |
| United Technologies | UTX | 17.12 | 2.31 | 11.65 | 19 |
| Chevron | CVX | 9.04 | 3.07 | 9.2 | 19 |
| Caterpillar | CAT | 9.98 | 2.39 | 8.23 | 19 |
| IBM Corp | IBM | 14.12 | 136 | 17.08 | 17 |
| Intel Corp | INTC | 12.27 | 3.65 | 14.09 | 9 |
| Verizon | VZ | 125 | 4.09 | 3.98 | 8 |
| ATT | T | 27.78 | 4.97 | 3.85 | 8 |
| Microsoft | MSFT | 18.08 | 2.55 | 14.27 | 7 |
| Travelers | TRV | 12.32 | 2.3 | 9.64 | 7 |
| United Health | UNH | 10.36 | 1.49 | 92.84 | 3 |
| Home Depot | HD | 24.5 | 1.68 | 9.03 | 3 |
| Disney | DIS | 17.89 | 1.36 | 14.12 | 2 |
| JP Morgan Chase | JPM | 9.55 | 2.24 | -4.11 | 2 |
| Pfizer | PFE | 19.84 | 3.27 | -5.38 | 2 |
| General Electric | GE | 16.31 | 3.08 | -9.45 | 2 |
| Hewlett Packard | HPQ | -- | 2.18 | 9.51 | 1 |
| American Express | AXP | 16.03 | 1.28 | 4.89 | 1 |
| Cisco Systems | CSCO | 13.66 | 2.16 | -- | 1 |
| Boeing | BA | 16.81 | 2.1 | 4.68 | 1 |
| DuPont | DD | 21.01 | 3.18 | 2.26 | 1 |
| Merck | MRK | 24.75 | 3.5 | 2.14 | 1 |
| Alcoa | AA | 45.95 | 1.42 | -27.52 | 0 |
| Bank of America | BAC | 45.45 | 0.35 | -55.91 | 0 |
What is your favorite dividend growth stock in the DOW30?
I’m torn between MCD and KO as a favorite, though I’d probably lean in favor of MCD. I’m not sure the raises will be as high over the coming 5 years, but I’d gladly settle for 10%p.a dividend growth over the period.
Can’t go wrong with MCD right now. I’m expecting sustainable revenue and EPS growth momentum from the recent menu changes.