But Will These Stocks Shine? 

The stock market has capped the best January for stocks since 1997, and strong retail sales and hints of improvements in the job and housing markets are making it look like 2011 is going to be a good year for investors. 

But after all the uncertainty of the past few years, many investors are reluctant to jump in with both feet. Safe-haven investments like gold and high-yield dividend stocks remain in favor because some folks are afraid the recovery will stall, while others are downright expecting the bottom to fall out. 

Whether you’re bullish or bearish on stocks in 2011, a guaranteed payday of 4%, 5% or even 6% via dividends is a great way to provide stability to your portfolio. And when you’re looking for the top dividend stocks, the blue chips in the Dow Jones Industrial average have a lot to offer. 

Here are the 10 dividend stocks boasting the highest yield among the Dow components that income investors may want to consider: 

 

10. Chevron (CVX)

Market Cap: $194 billion
Annual Dividend: $2.88
Yield: 3.1% 

Coming in at No. 10 on the list is integrated oil and gas company Chevron (NYSE: CVX). Chevron is truly a dividend aristocrat, and has paying shareholders a dividend for 99 years. This quarter, CVX will dole out 72 cents to shareholders. 

In addition to the handsome yield, CVX has also seen a stock return of 31% over the past year, and 18% in the last three months alone. It is also important to note that analysts are projecting EPS of $2.41 this quarter, compared to EPS of $1.53 this quarter last year thanks to high crude oil prices. Those owning CVX seem to have some upside based on energy inflation, and the dividend only sweetens the pot. 

 

9. Dupont (DD)

Market Cap: $47 billion
Annual Dividend: $1.64
Yield: 3.3% 

Next on the list of top dividend stocks is Dupont (NYSE: DD). Dupont, which makes products for the agriculture, food, building, construction, electronics, communications, general industrial and transportation industries, pays a quarterly dividend with a 3.3% yield. 

Additionally, DD stock has performed well in the last year, and is up 54% in the past 12 months and was one of the best performers in the Dow for 2010. 

 

8. McDonald’s (MCD)

Market Cap: $78 billion
Annual Dividend: $2.44
Yield: 3.3% 

Fast-food giant McDonald’s (NYSE: MCD) is another Dow stock that hands out a nice dividend each quarter. This quarter shareholders will be receiving a payment of 61 cents, good for a 3.3% yield after McDonald’s dividend increase of 11% in September. 

Though McDonald’s has slightly underperformed the market in the past year, analysts predict that EPS will be six cents higher this quarter and things could be looking up for the restaurant powerhouse. 

 

7. Intel (INTC)

Market Cap: $120 billion
Annual Dividend: 72 cents
Yield: 3.4% 

Semiconductor chip maker Intel (NASDAQ: INTC) develops advanced integrated digital technology products, primarily circuits and chips. Intel is also known for dishing out a 72 cent dividend to shareholders each year, representing a 3.4% yield. Importantly, INTC has been paying a dividend since 1992, which means it is a safe bet that the tradition will continue. 

Intel recently was in the news for a minor error in one of its chips, but that hasn’t stopped the tech stock from posting a small gain so far in 2011. 

 

6. Johnson & Johnson (JNJ)

Market Cap: $167 billion
Annual Dividend: $2.16
Yield: 3.6% 

Johnson & Johnson (NYSE: JNJ) is known across the country for its wide range of health-care products. Some investors also know JNJ as a company that has been paying a dividend since 1944. In the last year, JNJ stock has slipped 4%. Additionally, its earnings numbers are lackluster, and in its last income statement the company reported quarterly earnings growth of -12%, year-over-year. 

But while the past 12 months haven’t been great for JNJ shareholders, they can find solace in the fact that company will dole out a dividend of 3.6% this quarter.  

 

5. Kraft Foods (KFT)

Market Cap: $54 billion
Annual Dividend: $1.16
Yield: 3.8% 

Kraft Foods (NYSE: KFT) is a household name that manufactures and sells packaged foods. Over the past 12 months, KFT has lagged the market, but since 2001, the company has paid a quarterly stipend to its stockowners. In the next quarter, Kraft will be handing out 29 cents per share via a dividend. That 3.8% yield is good for fifth on this list. 

Another statistic that should be noticed is Kraft’s quarterly revenue growth, which was 26% year-over-year, according to its last income statement. Kraft is down slightly in 2011, but the dividend could be a selling point for investors. 

 

4. Pfizer (PFE)

Market Cap: $154 billion
Annual Dividend: 80 cents
Yield: 4.4% 

Research-based pharmaceutical company Pfizer (NYSE: PFE) breaks the top five with a 4.4% yield. PFE stock has a meager 12-month return of +3% — and while that is not nearly as high as the gains of the broader markets in the last year, Pfizer investors can take comfort in a 9% gain in the last three months. 

In addition to the recent rebound, shareholders are also pleased with the fact that they receive such a high yield dividend, totaling 80 cents a year. It will be interesting to see if PFE can continue its recent momentum or plateau as expiring patents and generic competition wear away at its suite of blockbuster drugs. 

 

3. Merck (MRK)

Market Cap: $105 billion
Annual Dividend: $1.52
Yield: 4.6% 

Global health-care company Merck (NYSE: MRK) produces medicines, vaccines, biologic therapies, and consumer and animal products. In addition to these products, MRK will also give its shareholders a stipend of 38 cents this quarter. While the high yield is certainly an attractive offer, MRK stock has done poorly over the last year, dropping 11% in that time. More recently, the stock is down 6% in the last month. 

While shareholders aren’t thrilled with the stock’s performance in general, the high dividend may soften the blow for some. But like Pfizer, the big question is whether this drugmaker can fend off the impact of generics and expiring patents. 

 

2. Verizon (VZ)

Market Cap: $103 billion
Annual Dividend: $1.95
Yield: 5.5% 

Verizon Communications (NYSE: VZ) is a provider of communications services and is mostly known for its mobile phone coverage. Major news broke two weeks ago when Verizon announced that it would begin carrying the widely popular iPhone from Apple (NASDAQ: AAPL), which was previously only available on competitor AT&T’s (NYSE: T) mobile plan. 

VZ is up 23% in the past year, and the iPhone news should keep the stock on an upward trajectory. More recently, the stock has gained 12% in the last three months. The fact that Verizon also pays out the second-highest dividend yield of all the Dow components also attracts buyers. This quarter, VZ will dish out 49 cents, good for a 5.5% yield. 

 

AT&T (T)

Market Cap: $165 billion
Annual Dividend: $1.72
Yield: 6.3% 

The only stock paying a higher dividend than Verizon is its main competition AT&T (NYSE: T). With a 43-cent quarterly payment, AT&T’s 6.3% yield is the largest among Dow stocks. 

In the last 12 months, T has also enjoyed a hike in stock price of 10%. However, in the last month, this communication stock is down 5%, and part of that may be due to Verizon acquiring the iPhone. 

The company is maintaining decent earnings numbers with analysts predicting EPS of 62 cents this quarter, 3 cents higher than last year. However, it will be important to keep an eye on T now that its biggest draw, the iPhone, will begin to be offered by its biggest competitor.