Last Friday, the S&P 500 closed right at its key technical resistance of 1900. Previously, the benchmark index twice failed to break through that level, only to be followed by sharp pullbacks of 50-60 points that incited “false breakout” criticisms. There were cries of “look out below” and concerns that the bull market had peaked, but as the CBOE Volatility Index (VIX) trades at historic lows — implying investor complacency — the pop in the S&P to fresh all-time highs hasn’t been met with any particular fanfare.
The rally that looked like it had legs at the end of last year hasn’t really materialized in 2014, and the bond market, which showed all the signs that higher yields were ahead, never played out that way, either. On a year-to-date basis, the numbers are pretty flat:
- S&P 500 +3.9%
- Dow +0.7%
- Nasdaq +1.7%
- Russell 2000 -2%
The latest release of the Case-Shiller 20-City Index showed a resumption of upward movement in home prices, and durable goods for April showed a gain of 0.8% versus forecasts for a 1.3% decline. Both of these provide further evidence for the camp that suggests second-quarter GDP will register a gain well north of 3%. All the while, bond yields remain low as investors cite concerns of the recovery’s sustainability, lagging employment, poor wage growth and Fed tapering.
Even as the S&P is taking out a significant resistance level, bond yields are moving lower. The 10-Year Treasury note yield is trading below the 2.50% level, which is truly a counterintuitive trend for a stock market that is pressing to new all-time highs. Evidently, the bond mavens have no fear of inflation, Fed tapering or the potential for a tightening of the fed funds rate.
In any case, the rally in bonds is acting as a catalyst for boosting money flow into high-yield assets where there are some exceptional payouts to be had. And for steady and reliable dividends, look no further than the “Dogs of the Dow,” which are the top 10 highest-yielding stocks in the Dow Jones Industrial Average. These blue-chip names pay out sizable yields ranging from 3.1% to 5.2%, all of which beat the measly 2.45% current yield on the 10-Year Treasury by a wide margin.
With that in mind, here are the top 10 Dow dividend stocks by yield for May. (Note: All yields and returns are as of 5/29.)