It’s been a mostly good year for a group of blue-chip stocks, even as artificial intelligence continues to dominate the investor psyche. A cohort known as the “dogs” of the Dow Jones Industrial Average is a changing list of stocks with the highest dividend yield at the end of each year. Popularized by investor Michael O’Higgins in the early 1990s, the idea is to buy the top 10 stocks with the highest dividend yields at the start of each year. Hopefully, their share prices will rise, an extra perk on top of the cash payouts these companies offer shareholders. Because dividend yields typically rise when stock prices fall, the idea is that traders could be getting a discount compared with historical levels. This can offer an entry point into high-quality names, especially given the Dow’s strong reputation. 2024 has been an interesting trading year, with market participants focused on what many see as narrow leadership. Namely, Nvidia has soared more than 130% as AI continues grabbing investors’ attention. Despite those worries about leadership, the Dow has climbed more than 4% so far this year and at one point crossed 40,000 for the first time. For those who subscribed to the dogs theory, there’s largely been upside — with 7 of the 9 stocks beating the Dow. One dog — Goldman Sachs — has returned more than 20% this year. CNBC Pro tracked how the 2024 dogs have done so far this year and compiled data from FactSet on where these names can go next. These stats are current as of Monday afternoon: Verizon runs the dog house with the highest current dividend yield at 6.6%. Shares have climbed more than 12% this year. Just around one out of every three analysts polled by FactSet has a buy rating on the stock. However, the average price target suggests about 10% more room to run over the next year. With a decline of 4.5%, Cisco is the only dog whose shares have fallen this year. The stock also has a current dividend yield of 3.4%. Though shares have struggled, the typical analyst surveyed by FactSet anticipates a bounce of more than 12%. More than one out of every five have buy ratings. Bank of America’s Tal Liani joined the bull camp in April with an upgrade of the stock to buy. In addition to having multiple growth drivers, he said there’s low expectations and valuation support. “Networking should see renewed growth on normalization of Campus switching demand and Ethernet-based AI buildouts, new product announcements should support growth reacceleration of its Security business, and we see Splunk synergies supporting growth initiatives in Security and Observability,” he wrote to clients. “Additionally, Cisco’s shift to recurring and subscription revenue is positive and helps support the stock, with 50% of revenue now recurring.” While Goldman Sachs has seen the best year-to-date performance, the bank has the lowest current dividend yield on the list at just 2.4%. After such a strong run, analysts surveyed by FactSet see the stock falling close to 1% in the next 12 months. That makes it the only dog that Wall Street expects to pull back in this period. Still, more than half of analysts rate the stock a buy. Note we removed Walgreens from the list because the company exited the Dow.
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