In this article, we will take a look at some of the best dividend stocks in the Dow.
The Dow is a highly recognized and influential stock market index that tracks the performance of 30 publicly traded companies listed on US stock exchanges, representing a wide range of industries. In the past 12 months, the index has surged by nearly 16%, and it has delivered a return of over 5% since the start of 2025.
Almost all of the companies in the index distribute dividends to their shareholders, with some having stronger dividend records than others. While there is a lot of focus on AI-driven capital gains, it’s important to keep in mind that dividends have consistently been a key component of total returns. Over the long term, their importance grows. From 1987 to the end of 2023, about 55% of market returns have been generated from reinvested dividends.
In 2024, dividend stocks lagged behind as the AI boom and growing interest in tech stocks shifted investor focus elsewhere. The Dividend Aristocrats index, which tracks companies with at least 25 years of consecutive dividend growth, underperformed relative to the broader market. However, analysts remain optimistic about the long-term potential of dividend stocks. This confidence is driven by the substantial cash reserves many US companies hold, which provide a strong foundation for sustaining or increasing dividend payouts. The Wells Fargo Investment Institute reports that large-cap US companies collectively hold over $2.4 trillion in cash, creating significant opportunities to start or enhance dividends.
Also read: 12 Best 5% Dividend Stocks To Buy According To Hedge Funds
Dividends are a strategy that requires patience, with rewards unfolding over time. For instance, if you had invested a dollar in the broader market in 1927 and didn’t reinvest any dividends, it would now be worth $243. However, if dividends had been reinvested, that same dollar would have grown to $3,737. The good news is that you don’t need to wait a century to see the growth potential of dividend stocks, as the near-term outlook is positive. A report from AGF Investments notes that global monetary easing in the latter half of 2024 has driven bond yields lower, making them less appealing compared to dividend-paying stocks. Moreover, companies that distribute higher dividends tend to have more financial leverage, and with lower bond yields, they can better manage their interest expenses, enhancing their financial performance and supporting continued dividend growth.
Chris Senyek, Chief Investment Strategist at Wolfe Research, offers an alternative approach to investing in dividend stocks. While most investors focus on companies with growing dividends and high yields, Senyek recommends also considering companies that are starting to pay dividends or those that have recently cut their payouts. A new dividend often signals that management is confident in its ability to sustain earnings and cash flow, while also appealing to a broader group of investors.
Senyek also pointed out that stocks of companies that reduce their dividends typically underperform before the cut, align with the broader market afterward, and then start to outperform about six months later. The strategy is to identify companies that might be at risk of cutting their dividends and reassess those that have already made cuts in recent months. To predict potential dividend cuts, Senyek looks for companies with high dividend yields, significant debt, and high payout ratios. For companies that might begin paying dividends, he focuses on those with strong free cash flow yields, active share buybacks, and manageable debt levels. With this in mind, we will now take a look at some of the best Dow dividend stocks according to analysts.
Our Methodology:
For this article, we examined the companies within the Dow Jones index and identified companies that pay dividends to shareholders. From that group, we further refined our selection criteria by identifying stocks with a projected upside potential of over 10% based on analyst price targets, as of February 6. The stocks are ranked according to their upside potential. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Visa Inc. (NYSE:V)
Upside Potential as of February 6: 10.6%
Visa Inc. (NYSE:V) is a California-based multinational payment card services company. Its expansion is largely driven by the global transition to digital payments, which has been accelerated by technological advancements. While electronic transactions have made significant progress, cash remains the dominant payment method in many developing regions, leaving substantial room for growth. According to the Federal Reserve, cash usage fell to 16% of transactions in 2024, reflecting a growing preference for digital payments. Younger consumers, particularly Gen Z and Millennials, are at the forefront of this shift, favoring contactless and mobile payment options. Demographic trends and evolving technology continue to support the increasing adoption of digital wallets and other cashless solutions.
In fiscal Q1 2025, Visa Inc. (NYSE:V) reported revenue of $9.5 billion, which showed a 10% growth from the same period last year. The company processed a total of 63.8 billion transactions in the three months ending December 31, 2024, reflecting an 11% increase compared to the same period the previous year. During this timeframe, the company’s payment volume also saw a 9% year-over-year rise on a constant-dollar basis.
Visa Inc. (NYSE:V) also demonstrated a strong cash position. The company ended the quarter with over $16 billion available in cash and cash equivalents. Its operating cash flow for the quarter came in at $5.4 billion, up from $3.6 billion in the prior-year period. The company returned $5.1 billion to shareholders through dividends and share repurchases. It currently offers a quarterly dividend of $0.59 per share and has a dividend yield of 0.68%, as of February 6. V is one of the best dividend stocks on our list as the company has been growing its payouts for 16 consecutive years.
At the end of Q3 2024, 165 hedge funds tracked by Insider Monkey reported having stakes in Visa Inc. (NYSE:V), up from 163 in the previous quarter. The consolidated value of these stakes is nearly $27 billion. With over 16.7 million shares, TCI Fund Management was the company’s leading stakeholder in Q3.
9. The Travelers Companies, Inc. (NYSE:TRV)
Upside Potential as of February 6: 11.22%
The Travelers Companies, Inc. (NYSE:TRV) is an American insurance company that offers property and casualty insurance for both personal and commercial purposes. In the fourth quarter of 2024, the company’s core income reached a record $2.1 billion, driven by solid growth in earned premiums and strong profitability. Net earned premiums rose by 9% to $10.9 billion, while the combined ratio improved by 2.6 points to 83.2%. This improvement was attributed to strong underlying profitability and higher net favorable reserve development from prior years.
In the past 12 months, The Travelers Companies, Inc. (NYSE:TRV) delivered a nearly 16% return to shareholders. The company’s cash position was also stable, which makes it a reliable dividend payer. In FY24, it reported an operating cash flow of over $9 billion. The company also returned $2.1 billion to shareholders through dividends and share repurchases during the year.
On January 22, The Travelers Companies, Inc. (NYSE:TRV) declared a quarterly dividend of $1.05 per share, which was in line with its previous dividend. Overall, the company has been growing its payouts for 11 consecutive years, which makes TRV one of the best dividend stocks on our list. The stock supports a dividend yield of 1.70%, as of February 6.
Firebird Management LLC made the following comment about TRV in its Q3 2024 investor letter:
“The Travelers Companies, Inc. (NYSE:TRV), a part of our portfolio since 2013, is a traditional regulated insurer. It stands out in the market by selling commercial and personal property/casualty insurance through a network of independent agents and brokers. While this approach may seem outdated to consumers accustomed to online comparison sites, it remains a dominant form of distribution for most insurance lines.
Commercial, workers’ compensation, and other lines are an area of strength for Travelers, which is 80%+ reliant on independent agents primarily because small and middle market businesses rely on the agents to understand each company’s unique situation and tailor the insurance offering to the needs…” (Click here to read the full text)
As of the close of Q3 2024, 37 hedge funds tracked by Insider Monkey held stakes in The Travelers Companies, Inc. (NYSE:TRV), compared with 38 in the previous quarter. The collective value of these stakes is more than $1 billion.