The frequency of new highs for the Dow and S&P 500 would make one think that the market is off to the races in 2014, when, in fact, the Dow is ahead by 2.2%, the S&P by 6.2%, the Nasdaq by 4.6% and the Russell 2000 by just 2.1%.
This performance falls well short of investors’ hopes and expectations coming into the new year. So, now that we are closing in on the halfway point, the stutter-start for the market that has characterized the past several months is beginning to give way to the notion that a very good second half of the year is shaping up. Investors should expect back-end-loaded returns for risk-on assets, and that forecast is just now taking hold, with vast numbers of fund managers on the wrong side of the investing landscape by holding too much cash, too much long bond exposure and too many short positions via indices or individual stocks.
End-of-the-quarter window-dressing began in earnest this month, as the wrong-way portfolio managers were provoked into making drastic changes in their asset mix, jettisoning long-dated fixed income, covering shorts and putting those assets (plus uninvested cash) to work in rapid fashion. No professional wants to put out a report card in early July that reveals bad bets and being underweighted in sectors that are leading the market to new highs. For this reason, window-dressing by itself should keep a firm bid under stocks and might well take the S&P up to the extreme high end of the long-term channel uptrend of 2000 by month-end.
With this backdrop of fresh technical highs, professional money realigning to risk-on assets, a low level of investor enthusiasm, rising economic conditions for global markets, persistently low interest rates, strengthening corporate balance sheets, diminished geopolitical risk, highly accommodative central bank policies and history’s greatest number of people entering retirement, the investment case for strategic high-yield assets is very strong for the balance of 2014.
In order to take advantage of this inflow of capital into assets with yield, look no further than the 10 highest-yielding stocks in the Dow Jones Industrial Average. These blue-chip names pay out sizable yields ranging from 3% to 5.2%, and all of them stand to benefit from the market’s appetite for income.
Now that we have an idea of what the market will favor during the second half of 2014, let’s take a look at the top 10 Dow dividend stocks by yield for June. (Note: All yields and returns are as of 6/26.)