Are you looking for a reliable way to increase the passive income your stock portfolio produces? The Dow Jones Industrial Average is a great place to start looking, and it won't take long. The century-old index is limited to just 30 different businesses, all of which are leaders in their respective industries.
The overall stock market recently rallied around an interest rate reduction, but shares of Verizon(NYSE: VZ) and Dow(NYSE: DOW) still look like bargains. These are the Dow Jones Industrial Average's two highest-yielding components, and they offer dividend yields above 5% at recent prices.
These Dogs of the Dow have been under pressure over the past few years, but their dividend programs are on solid footing. Here's why buying these stocks now with the intention of holding them forever looks like a smart move.
Verizon
By revenue, Verizon is the largest of America's three main mobile internet service providers. The stock has risen recently but remains about 29% below a high-water mark it set more than four years ago. At recent prices, it offers a 6.1% dividend yield that is hard to pass up.
With steady profits from one of just three large 5G networks in America, Verizon has been able to raise its dividend payout for 18 consecutive years. Fewer businesses are subscribing to its wireline broadband service, but the rapid growth of its fixed wireless broadband service is more than offsetting the loss.
In the second quarter, smartphone upgrades declined 13% year over year, but a recently launched iPhone could remedy this situation. Despite a headwind from fewer customers upgrading their smartphones, total second-quarter revenue rose 0.6% year over year.
Consumers don't have as many reasons to upgrade their devices as they used to, but increasing data usage trends remain strong. Verizon was able to push its big needle forward because second-quarter wireless service revenue marched 3.5% higher year over year.
Verizon expects adjusted earnings to be between $4.50 and $4.70 per share this year. That's enough to reduce its debt position and raise a dividend payout currently set at about $2.71 per share.
In 2023, Americans used more than 100 trillion megabytes of wireless data, according to CTIA. That's 36% more than in 2022 and nearly twice as much as we used in 2021. A steadily rising mobile data usage trend gives Verizon a great chance to keep raising its payout over the long run.
Dow
Industrial chemicals, synthetic fibers, and plastics might not get your blood pumping, but these basic materials are a vital component of the global economy. As a leading producer of materials that become other products, Dow is a relatively safe bet for income-seeking investors. At recent prices, the stock offers a big 5.4% dividend yield.
In the second quarter, volume increased 1% year over year, but a less-than-fiesty global economy means prices are down. As a result, total second-quarter sales declined 4% year over year.
Providing basic materials is a cyclical business, and Dow has survived more than a few dramatic economic cycles in its history. The company has been unable to raise its payout since DowDuPont split into three companies about five years ago, but a global upswing in demand for its products could be around the corner.
Investors can reasonably rely on Dow to maintain its present dividend commitment over the long run. Dow has no major debt maturities until 2027, and it finished the second quarter with total liquidity of $13 billion.
Dow probably won't be the fastest-growing income stream in your portfolio. Given its position in the global economy, though, it could be the most reliable over the long run.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
