The Dogs of the Dow 2025 pay big dividends—up to 6.8%! Collectively they yield three-times what the broader market pays. We’ll discuss individual Dogs—and their divvies—in a moment. First, the simple three-step strategy:
- Step 1: After the final trading day of the year, identify the 10 highest-yielding stocks in the Dow.
- Step 2: Buy all 10 stocks in equal amounts and hold them for a year.
- Step 3: At the end of the year, sell, then rinse and repeat.
Why has this strategy worked in the past? Dividends are an indicator of value.
Especially for big blue chips like Dow stocks. These companies are not going out of business in 2025. They are beaten-down stocks that are out of favor today, but with serious bounce-back potential tomorrow.
In recent years, though, the Dogs’ track record has been lackluster. These stocks fell behind the market in 2019, 2020, and 2021. They surged in 2022, but they went back to underperforming in 2023 and 2024.
2024’s Dogs Were Well Behind the Pack
Clearly, Walgreens (NASDAQ:WBA) (WBA) implosion was the primary driver of the Dogs’ dreary year. And in fact, Walgreens’ removal from the Dow in February 2024 made the performance gap even worse—the Dogs were stuck with all of WBA’s losses, while the industrial average only suffered for a couple of months.
And that’s why investors might be better off targeting individual Dogs components rather than blindly buying the group.
So, who are 2025 Dogs of the Dow?
The 2025 Dogs of the Dow
Even with the Dogs averaging a 3.5% annual yield, we’re still well behind the amount of income we need to retire on dividends alone. So we’re going to need some upside potential as well.
With that, let’s see which Dow Dogs offer up the most ideal combination of dividends and price potential. I’ll start with a fresh pair of faces that have joined the Dogs for the first time in years, and we’ll meet a third newcomer a little later.
#10: Procter & Gamble
The Skinny: Procter & Gamble (NYSE:PG) (PG, 2.4% yield to start 2025) hasn’t been in the Dogpound since before COVID-19, but not because of a poor 2024. Yes, shares flamed out in December—but that mostly appears to be PG getting caught up in a sharp, broad downturn across several defensive sectors. As it turns out, P&G’s roughly 17% total return in 2024 was actually about 5 percentage points ahead of the consumer staples sector. Procter & Gamble also boosted its yield with a 7% dividend hike announced in April 2024.
What Has to Go Right: For the most part, PG just needs to continue doing what it’s doing. For instance, P&G is in the midst of trying to achieve $500 million to $700 million in efficiencies and savings in its media unit by cutting down on outside marketing agencies and bringing more of its media operations in-house. It’s also working on upgrading its supply chain; for instance, it’s using a network that optimizes truckloads at its warehouses, using algorithms to detect product defects, and up-skilling its supply chain employees. And it’s even innovating further with Tide. Specifically, it has been testing Evo detergent tiles—an eco-friendly solution that should also lower packaging costs—and could go national in 2025. If anything is going to slow PG down, it’ll likely be macroeconomic issues. And even then, it’s difficult to imagine anything stopping Procter & Gamble from paying dividends for the 135th consecutive year or growing them for a 69th year in a row.
PG’s Price + Payout Accelerated Pre-COVID, Then Kept Going
#9: McDonald’s
The Skinny: The other newcomer? McDonald’s (NYSE:MCD) (MCD, 2.5% yield), which has gone a full decade since its last stint with the Dogs. A little of the lift in McDonald’s yield came the old-fashioned way, with the company announcing a 6% improvement to its payout in September. However, we can mostly blame a lousy 2024 in which MCD stock effectively broke even (with dividends included).
A pair of revenue and same-store sales misses for Q1 and Q2—the latter quarter representing the company’s first same-store sales decline since Q4 2020—sent McDonald’s shares plunging throughout the first half of 2024. Customers, fed up with higher prices, were finally pushing back, forcing McDonald’s to begin more promotional activity, like its $5 meal deal launched in late June. MCD began to rebound at midyear and delivered better-than-expected Q3 results, but an E. coli outbreak in October quickly stunted the rally.
What Has to Go Right: The E. coli breakout is contained, and while that could weigh on MCD’s fourth-quarter report, it’s unlikely to have any lingering effect in 2025. Now, McDonald’s needs to continue what it was doing to turn around comps in the U.S.: Limited-time offers and stronger value offerings were getting the job done. More worrying is the international picture. McDonald’s had already been facing consumer-spending pressures in Europe and China, and while initiatives there have shown at least some progress, MCD might face a steeper uphill climb if the global economy weakens as expected.
#8: Cisco Systems
The Skinny: Cisco Systems (NASDAQ:CSCO) (CSCO, 2.7% yield) had a fruitful 2024 that saw it return more than 20%—a few percentage points shy of both the tech benchmark and the S&P 500, but still a respectable outing. The stock was actually on pace for losses for the year until its August fiscal fourth-quarter and full-year earnings report, in which it delivered top- and bottom-line beats, as well as better-than-expected fiscal Q1 guidance and a generally rosy preliminary fiscal 2025 outlook. Not nearly so respectable was Cisco’s meager 2.6% dividend bump announced in February 2024.
What Has to Go Right: A tech company is leaning on AI. Surprising, right? Cisco says it took more than $300 million in AI product orders during fiscal Q1 and expects $1 billion across fiscal 2025. Cisco shares could jump to life if that AI order outlook ends up being on the conservative side. Continued success from Splunk (NASDAQ:SPLK), which has fat (80%) gross margins and increasingly contributing to Cisco’s bottom line, would be welcome, too. Cisco will also want to see a bounce-back in federal spending—though the Fiscal Responsibility Act and increased focus on federal spending could hamper that.
#7: International Business Machines
The Skinny: International Business Machines (NYSE:IBM) (IBM, 3.1% yield) had a booming 2024, with a 37% total return crushing both the market and the tech sector. We could pin that on its continued gains in software, which, thanks in large part to the Red Hat acquisition, are close to being half of IBM’s revenues (versus only about a quarter just a few years ago). But most of the enthusiasm surrounds the company’s AI efforts; in its third-quarter report, Arvind (NS:ARVN) Krishna, IBM’s CEO, said “Our generative AI book of business now stands at more than $3 billion, up more than $1 billion quarter to quarter.”
What Has to Go Right: IBM needs to successfully digest yet another acquisition—this time infrastructure cloud company HashiCorp (NASDAQ:HCP), whose buyout should close in 2025. It also needs its restructuring efforts to continue bearing savings. And of course, it needs AI to continue what it’s doing. Still, after years of being dogged as a company that was too behind the new-technology 8-ball, Big Blue increasingly looks like a case of “down but not out.”
Every Turnaround Has to Start Somewhere
#6: Coca-Cola
The Skinny: Consumer staples were once again weak in 2024, and Coca-Cola (NYSE:KO) (KO, 3.1% yield) was no exception, putting up a modest 9% total return. But it did so in surprisingly volatile fashion. During the summer, a Q2 earnings beat and raised full-year outlook sent shares rocketing to a 25% year-to-date gain, but much of that evaporated after its Q3 report, during which it projected mid-single-digit currency headwinds on its earnings.
What Has to Go Right: The big fear going into 2024 was that GLP-1 agonists would eventually eat away at demand for Coca-Cola’s sugary drinks. While that could be a longer-term issue, that didn’t appear to materialize much last year. Perhaps the bigger question is how much longer consumers will be willing to accept price hikes—in Q3, Coke’s average price of products sold increased 10%! Coca-Cola’s best bet is continuing to reinvigorate its brands. One of its next attempts: a ready-to-drink cocktail (Bacardi mixed with Coca-Cola), which will launch in Europe and Mexico in 2025.
#5: Merck
The Skinny: In a word: Yuck. Healthcare finished 2024 up just 2%, and Merck (NS:PROR) (MRK, 3.3% yield) managed to do even worse, losing a little more than 6% with dividends included. One of the most noteworthy weights on the stock is weakness in sales of its Gardasil HPV vaccine in China. The problem isn’t just a flailing Chinese economy—it’s also related to an anti-bribery campaign that Reuters says “disrupts business and scuttles hospital deals with international pharmaceutical companies.” MRK also took a hit after it lowered its full-year revenue guidance. As a result, Merck finds itself back on the list for the first time since 2022.
What Has to Go Right: Merck needs to begin communicating how it will eventually overcome the “Keytruda gap.” Keytruda is Merck’s cancer wonderdrug, racking up $7.4 billion in sales in the third quarter of 2024 alone. However, Merck may have to contend with Inflation Reduction Act-mandated Medicare drug-price negotiations, and longer-term, biosimilars are now in Phase 3 clinical trials and could challenge the drug in a few years).
Other things to watch? Traction on invasive pneumococcal disease and pneumococcal pneumonia vaccine Capvaxive, which the CDC’s Advisory Committee on Immunization Practices voted to recommend to adults 50 years of age and older (from 65 years and older previously); European Commission approval for Winrevair for the treatment of pulmonary arterial hypertension; additional product approvals; developments from recent acquisition Curon Biopharmaceutical, as well as Daiichi Sankyo, which recently signed an expanded development and commercialization agreement with Merck.
#4: Johnson & Johnson
The Skinny: Johnson & Johnson (NYSE:JNJ) (JNJ, 3.5% yield) finds itself even higher on the list of Dow dogs following a 6% total-return loss in 2024 and a 4% hike to its payout. Similar to Q3 2023, a fantastic 2024 third quarter—which included top- and bottom-line beats and an improved full-year operational sales outlook—were unable to provide a lift to shares. But one small line item—the Medtech division saw weaker-than-expected organic growth of 3.7% (vs. +5% expected), and management guided for 5% full-year growth vs. 6% previously—nods at a potential worry for next year.
What Has to Go Right: Johnson & Johnson is facing a number of potential headwinds in 2025, including the potential for threatened tariff increases to weigh on Medtech, which represented more than a third of Johnson & Johnson’s 2023 revenues. In general, a new administration brings with it uncertainty in healthcare policy, hence the sector’s post-election slump. Drug pricing is a question mark, too. And Stelara will be facing biosimilar competition in 2025. JNJ could use a strong launch for the Crohn’s disease indication for its Tremfya drug, as well as continued momentum for oncology drugs Darzalex and Carvykti.
J&J Needs a Catalyst to Get Out of Its Post-Kenvue Funk
#3: Amgen
The Skinny: Just like the prior two healthcare stocks, biotechnology firm Amgen (NASDAQ:AMGN) (AMGN, 3.7% yield) struggled in 2024, and most of its weakness came in the year’s final quarter. But we won’t find much of an explanation in Amgen’s earnings—it delivered strong earnings in all three of its 2024 reports. The big weight on AMGN? Phase 2 results of its injectable MariTide weight-loss drug came in below expectations.
What Has to Go Right: “Two words: Weight loss.” That was my prediction at the start of 2024, and that very much ended up being the case by the end of the year. But the Street might have overdone the selling on Amgen. While MariTide is being compared to the likes of Ozempic and Mounjaro, it has an important differentiator—dose frequency. That is, MariTide would only need to be administered once a month or even less frequently. In other words: The weight-loss story isn’t over yet. Past that, uptake for Imdelltra (extensive-stage small cell lung cancer), additional positive results for trial-stage eczema treatment rocatinlimab, and the market taking notice of Amgen’s improving fundamental story could all help rally shares of this dividend magnet.
#2: Chevron
The Skinny: 2024 was eerily similar to 2023. Oil went through another roller-coaster year only to end up at a single-digit loss on the year. And that meant a lousy final result for Chevron (NYSE:CVX), which finished 2024 only fractionally higher, and that was thanks to its generous dividend. One of the most meaningful differences, though, was the last quarterly report Chevron delivered in calendar 2024. Its 2023 Q3 included a wide bottom-line miss. However, while profits were 31% lower year-over-year for the third quarter of 2024, CVX at least managed to top expectations this time around.
What Has to Go Right: CVX shareholders obviously would love to see a better year for energy, though there’s little to indicate that’s the case. The U.S. Energy Information Administration expects Brent crude oil to remain close to current levels in 2025, and it sees global oil production growing by 1.6 million barrels per day in 2025. Worries about weak economic activity were already weighing on oil prices in late 2024. Natural gas could be a little better, with the EIA forecasting $3.00/MMBtu (up from $2.20 in 2024). At the very least, shareholders should expect CVX to extend its dividend-growth streak to 38 years.
#1: Verizon
The Skinny: Verizon (NYSE:VZ) (VZ, 6.8% yield) was sitting on unusually robust year-to-date price gains (for a telecom) of 20% as of the start of 2024’s fourth quarter, but like a lot of other defensive stocks, it faded in December to a mere 5% for the year—though its fat dividend juiced that to more than 12%. It’s hard to blame Verizon, which made progress on a number of fronts last year, and was on track to add more than 800,000 postpaid customers in 2024 after adding just more than 200,000 in 2022.
What Has to Go Right: Verizon shareholders would argue that Wall Street just needs to open its eyes—after all, VZ trades at just 8 times earnings estimates. Price increases have been sticking, the company is growing its broadband base, and Verizon was set to receive a one-time cash payment of $2.8 billion as part of a 10-year deal with Vertical Bridge to lease and operate several thousand wireless towers. Of course, Verizon needs that money to deleverage from a whopping $150 billion in total debt—that’s nearly 90% of its market cap! VZ might avoid the same fate as Walgreens, which started the year as the top-yielding Dog only to cut its payout days later. But I don’t expect a jolt to Verizon’s dividend growth, which has slowed to a crawl.
Verizon’s Dividend Is Rising … at the Speed of Smell
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, "7 Great Dividend Growth Stocks for a Secure Retirement."