The “Dogs of the Dow” strategy consists of investing in the 10 highest-yielding stocks in the Dow Jones Industrial Average. Purchasing the Dogs of the Dow creates higher dividend income, by focusing on high-yielding stocks.

The following 3 stocks are part of the 10 Dogs of the Dow for 2024. They are not the highest-yielding Dow stocks, but they are among the top 10 and also have strong dividend growth potential in the years ahead.

Dow Inc. (DOW)

Dow Inc. is a standalone company that was spun off from its former parent, DowDuPont. That company has broken into three publicly traded, standalone parts, with the former Materials Science business becoming the new Dow Inc. Dow generates annual revenue above $40 billion.

Dow posted third quarter earnings on October 24th, 2023, and results were better than expected on both the top and bottom lines.

The company’s adjusted earnings-per-share came to 48 cents, which was three cents better than estimates. Revenue was down 24% year-over-year to $10.7 billion, but was $320 million ahead of expectations. Sales were down 6% sequentially, as volume gains were more than offset by lower local pricing.

Future EPS growth will be driven by stabilized pricing, margin gains from cost savings, and the company’s share repurchase program. The company’s product portfolio is not only its competitive advantage, but also should perform well enough during downturns to keep the company profitable.

The company’s focus on high-growth areas such as consumer care, packaging, and infrastructure, are potential growth catalysts. DOW stock currently yields 5.1%.

Verizon Communications (VZ)

Verizon Communications is a communication services stock and is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.

On October 24th, 2023, Verizon reported earnings results for the third quarter. For the quarter, revenue declined 2.7% to $33.3 billion, but this was in-line with expectations. Adjusted earnings-per-share of $1.22 was $0.04 more than anticipated. Verizon had postpaid phone net losses of 51K, but this was an improvement both on year-over-year and sequential basis.

Revenue for the Consumer segment declined 2.3% to $25.3 billion, though wireless service revenue improved 2.9% due to higher average revenue per account. Broadband totaled 434K net new customers during the period, the fourth consecutive quarter of at least 400K net adds. Wireless retail postpaid phone churn rate remains low at 0.85%.

Verizon reaffirmed guidance for 2023 as well with the company still expecting adjusted earnings-per-share of $4.55 to $4.85 for the year. Wireless service revenue is still projected to grow 2.5% to 4.5%. Free cash flow for 2023 is projected to be $18 billion, $1 billion higher than previously expected.

The strong free cash flow of the company fuels its high dividend payout. Verizon has increased its dividend for 19 consecutive years. VZ stock currently yields 7%.

Chevron Corp. (CVX)

Chevron is the fourth-largest oil major in the world based on its market cap. Chevron is more leveraged to the oil price, with a 57/43 production ratio split between oil and natural gas. Moreover, as Chevron prices some natural gas volumes based on the oil price, nearly 75% of its output is priced based on the oil price. As a result, Chevron is more leveraged to the oil price than the other oil majors.

Future growth will be fueled organically as well as a recent, huge acquisition. On October 23rd, 2023, Chevron agreed to Acquire Hess (HES) for $53 billion in an all-stock deal. Thanks to this deal, Chevron will purchase the highly profitable Stabroek block in Guyana and Bakken assets and thus it will greatly enhance its production and its free cash flow. As Chevron is fully valued, we view the all-stock deal as attractive for Chevron.

In late October, Chevron reported (10/27/23) financial results for the third quarter of fiscal 2023. Despite the rally of the price of oil triggered by a new round of production cuts by OPEC and Russia, earnings-per-share dipped -1% sequentially, from $3.08 to $3.05.

Chevron is likely to return to growth mode this year thanks to its sustained growth in the Permian Basin and in Australia. The company has more than doubled the value of its assets in the Permian in the last four years thanks to new discoveries and technological advances.

In addition, thanks to the high grading of its asset portfolio, Chevron can fund its dividend even at an oil price of $40. CVX has increased its dividend for 36 consecutive years. CVX stock yields 4.2%.

Disclosure: No positions

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.