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5 Dogs of the Dow for the Month of June

Tirthankar Chakraborty

Some investors expect Wall Street to continue its winning ways in June after last month’s strong gains. The Dow and the S&P 500 breezed past milestones last month, with IT, materials and communication services being the top-performing sectors.

 

Investors believe that rising tensions between the United States and China may not have a negative impact on the stock market. China has approved a national security bill that would increase Beijing’s power over Hong Kong. But President Trump’s actions are currently viewed as less confrontational than it had been expected. Even though Trump announced measures to limit China’s crackdown on Hong Kong’s independence, he didn’t give much hint on withdrawing from the phase-one trade deal with China or hasn’t issued any sanctions directly against Beijing.

 

To top it, upbeat economic data from China bolstered the market. Despite the coronavirus onslaught on economic growth, China’s factory activity expanded in May. The Caixin/Markit Manufacturing Purchasing Manager’s Index (PMI) was 50.7 in May compared with April’s reading of 49.4. 

 

Lest we forget, a PMI reading above 50 indicates expansion. In fact, the rate of expansion of output was the fastest since January 2011. But why is such data important for investors’ sentiment? This is because China’s manufacturing significantly impacts America’s economy as the nation’s products are used almost everywhere. China is currently the world’s factory, thanks to cheap labor, strong business ecosystem and less regulatory hazards.

 

Coming to the domestic front, improved consumer behavior and encouraging COVID-19 vaccine news may have driven gains for stocks this month. 

 

But does this mean that the Dogs of the Dow are dead this month and beyond? After all these stocks are the highest dividend payers among the Dow components, and we all know that dividend players tend to perform comparatively well when there is gyration in the market.

 

The answer is certainly not! This is because majority of investors are presently bearish and believe that that there is reason for the U.S. stock market to not hold on to May’s solid gains in June. Primarily, protests over the death of George Floyd have resulted in a lot of unrest in the country that continues to struggle to reopen its economy amid the coronavirus outbreak.

 

Large-scale demonstrations have erupted across the country, accompanied by looting and destruction of some retail stores and other small businesses. What’s more, several companies have temporarily shut down operations as they assess that the violence will continue this month, something that certainly doesn’t bode well for Wall Street.

 

But Dogs of the Dow have large customer base, sustainable business model, and a long track of profitability and strong liquidity, which allow them to offer sizable yields on a regular basis, regardless of market conditions. Thus, we present five top Dogs of the Dow that are worth watching in June and are poised to yield steady returns in the near future as well.

 

Exxon Mobil Corporation XOM explores for and produces crude oil and natural gas. It has a dividend yield of 7.7% and a five-year average dividend yield of 4.1%.

 

The company currently has a Zacks Rank #2 (Buy). Its expected earnings growth rate for the next five-year period is 12.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Verizon Communications Inc. VZ offers communications, information, and entertainment products and services to consumers, businesses, and governmental agencies. It has a dividend yield of 4.1% and a five-year average dividend yield of 4.5%.

 

The company currently has a Zacks Rank #3 (Hold). Its expected earnings growth rate for the next five-year period is 3.1%.

 

Chevron Corporation CVX engages in integrated energy, chemicals and petroleum operations. It has a dividend yield of 5.6% and a five-year average dividend yield of 4.2%.

 

The company currently has a Zacks Rank #3. Its expected earnings growth rate for the next five-year period is 5%.

 

Pfizer Inc. PFE develops, manufactures and sells healthcare products. It has a dividend yield of 4% and a five-year average dividend yield of 3.6%.

 

The company currently has a Zacks Rank #3. Its expected earnings growth rate for the next five-year period is 4.9%.

 

3M Company MMM focus on business transformation, with moves like localization of decision making and integration of supply chains. 3M is also one of the largest manufacturers of respiratory masks. It has a dividend yield of 3.8% and a five-year average dividend yield of 2.7%.

 

The company currently has a Zacks Rank #3. Its expected earnings growth rate for the next five-year period is 9.5%.

 

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
3M Company (MMM) : Free Stock Analysis Report
 
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