Top 10 Dow Dividend Stocks

And when it comes to high yield dividend stocks, there’s no better place to look than the bluest of the blue chip investments that make up the Dow Jones Industrial Average. These low-risk, stable companies are mainstays of many dividend investors’ portfolios.

But which Dow stocks are the best for dividends? To help you pick the highest yields, here is a ranking of the top 10 Dow dividend stocks as of July:

Barely edging out McDonald’s (MCD[2]) for the #10 spot is The Home Depot (HD[3]) with a 3.4% dividend yield.  This home improvement retailer has surpassed earnings estimates each of the last four quarters, and is providing investors with 96 per share annually with its dividend.  While its stock is down -4.8% since January, The Home Depot is still greatly outperforming major competitor Lowe’s (LOW[4]), which is down -13.6% in 2010 and only offers investors a 2.2% dividend yield.

Owner of more than 500 beverage brands, Coca-Cola (KO[5]) has the highest dividend yield among its competitors, at 3.5%.  Despite seeing an -11.2% drop in stock price in 2010, Coca-Cola shareholders are still enjoying an $1.76 dividend return. (Get a complete list of the best Dow Jones stocks from January to June[6]) And with its revenue remaining stable at $7.5 billion thanks to the strength of consumer staples sales, Coca-Cola remains a popular option for dividend investing.

Manufacturer and marketer of health care products Johnson & Johnson (JNJ[7]) has continually exceeded earnings estimates each of the last four quarters, and is looking to continue the trend.  While Johnson & Johnson’s dividend yield is lower than similar pharma and medical companies at 3.6%, JNJ’s stock has outperformed major competitor Pfizer (PFE[8]) considerably in 2010.  With a recent quarterly revenue of $16.8 billion and a strong history of dividend payouts, Johnson & Johnson remains a stable choice in the healthcare industry.

Kraft Foods (KFT[9]) has a current annual dividend of $1.16, and the stock itself is actually sporting a decent return – up +3.8% since January despite a slump in the broader stock market. (Get a complete list of the best Dow Jones stocks from January to June[6]) Kraft has exceeded earnings estimates for the past four quarters and has the highest dividend yield among major packaged foods competitors with +4.1%. With a quarterly revenue of $11.3 billion, this manufacturer of packaged food and beverages has seen a steady revenue
increase over the past four quarters and should only continue to see success in the  market.

Having exceeded earnings estimates by +22% last quarter, Chevron (CVX[10]) is going strong. The oil giant posts a dividend yield of 4.2% for shareholders.  Despite the fact that Chevron’s stock is down -8.9% in 2010, its latest earning report showed +33% higher quarterly revenue than the previous year, with $48.2 billion in sales. This shows that Chevron has a bright future, and plenty of cash to maintain and even boost its dividend going forward.

As the manufacturer of drugs like Vioxx, Propecia and Zocor, Merck (MRK[11]) sits along side the other pharmaceutical giants who are at the forefront of the industry. Although its stock has not proved to show any significant growth this year, the company is paying investors a $0.38 dividend each quarter, putting it in the top half of dividend payers in the Dow Jones with a plump 4.4% yield.

Investors in DuPont (DD[12]) have endured a gauntlet of ups and downs in 2010 but have come out at the end of the first six months of the year with returns above market averages. As one of only a handful of the DJIA stocks to work out in the plus column this year (get a complete list of the best Dow Jones returns[13] for the first half of the year), shareholders are also treated to a health dividend yield, netting 4.7% or $1.64 per share.

Industry-leading pharmaceutical manufacturer Pfizer (PFE[8]) is best known for its drugs such as Lipitor, Viagra and Zanax. Even when faced with a disastrous stock performance for the first six months of the year[14] (-21% return), shareholders can take solace in the fact that Pfizer’s 4.9% dividend yield is still counted among the top three in the Dow Jones Industrial average and higher than other big pharma rivals.

Global communications giant Verizon (VZ[15]) has landed right at the heels of AT&T, posting a 6.7% yield in 2010. With a customer base of about 91 million people and more than 222,000 employees, Verizon is paying out $1.88 per share in dividends — a proposition that may, for some shareholders, eclipse the unimpressive return percentage shares have seen so far this year.

Telecommunications provider AT&T (T[16]) hasn’t been very kind to shareholders when it comes to valuations. Among Dow component stock returns for the first six months of the year[17],  the stock is well below average coming in at -13.2% at the end of June. But despite the poor performance the iPhone carrier put up during the first half of the year, it still manages to weigh in at the top of the list on the Dow Jones in dividend yield, leading the pack at 6.9%.