Don't let this year's seemingly meager gain for the Dow Jones Industrial Average fool you. Sure, the index is up only less than 10% year to date compared to a 19% jump for the S&P 500. However, the Dow has soared 26% since its previous low set on Sept. 30, 2022.
All that's needed for the Dow Jones to begin a new bull run is for the index to establish a new high. It's less than 2% away from doing so.
A new bull market is nearly here for the Dow Jones. And there are three great Dow stocks for dividend investors to buy hand over fist.
1. Chevron
2023 hasn't been good for Chevron (NYSE: CVX). Shares of the oil and gas giant have tumbled nearly 20%, making it the Dow's second-worst-performing stock of the year.
But this dismal showing has made Chevron's valuation even more attractive. The stock trades at a forward price-to-earnings ratio of only 10. The decline has also boosted Chevron's dividend yield to a lofty 4.2%.
Look for that dividend to grow soon. Chevron has increased its dividend for 36 consecutive years. The company typically announces its dividend hikes in January. I fully expect that Chevron will keep its streak going next month with another dividend increase.
There's a good chance that the stock could rebound in the new year as well. The average Wall Street 12-month price target for Chevron reflects an upside potential of 25%. With oil prices forecast to trade between $70 and $100 a barrel in 2024, the company should be able to generate strong revenue and profits.
2. Microsoft
It's been a completely different story for Microsoft (NASDAQ: MSFT) in 2023. The tech stock has skyrocketed over 50% thanks in large part to the generative AI boom.
Microsoft's dividend yield is only a little over 0.8%. Why should dividend investors consider buying a stock with such a paltry yield? I think there are two reasons.
First, Microsoft's dividend payout continues to grow by leaps and bounds. The company increased its dividend by 10% in September 2023. Over the last 10 years, Microsoft has more than tripled its dividend payout.
Second, Microsoft should have tremendous overall growth prospects. The company is a leader in nearly every important technology of the future, including AI, gaming, quantum computing, and more.
3. Verizon Communications
Verizon Communications (NYSE: VZ) started off 2023 with its share price steadily declining. However, the telecommunications leader has turned things around in a dramatic way in the fourth quarter. Verizon could even end the year in positive territory.
It's easy to pinpoint the reason behind Verizon's comeback. The company reported better-than-expected Q3 results in October. Importantly, Verizon generated year-to-date free cash flow of $14.6 billion, up from $12.4 billion in 2022.
This strong free cash flow should mean that Verizon's dividends will continue flowing and growing. Income investors will no doubt love the company's dividend yield of 6.9%. They'll probably also like the fact that Verizon has increased its dividend for 17 consecutive years.
Granted, Verizon continues to face some challenges. Wireless, in particular, remains a highly competitive business with a lot of customer churn. However, the company plans to launch a bundled streaming deal for its wireless customers that includes the ad-supported versions of Netflix and Max. This move could enable Verizon to hold onto more customers while attracting new ones.
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Keith Speights has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft and Netflix. The Motley Fool recommends Chevron and Verizon Communications. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
