2 Buy-Rated Dow Jones Stocks That Pay More Than a 4% Dividend yield

Following a winning week, the Dow Jones Industrial Average (DJIA) rose 64.13 points to 35,741.15 for a record close yesterday. Solid third-quarter corporate earnings so far have driven the market to a positive start this week. The major benchmark indices have registered impressive gains this month, with DJIA advancing more than 5% month-to-date.

However, National Securities’ chief market strategist Art Hogan has warned investors of disappointing earnings and missed revenue targets ahead. He cited the headwinds tied to supply chain backlogs, inflation, and worker shortages. “Buckle your seatbelts,” Hogan said.

Given the expected market volatility in the near term, shares of International Business Machines Corporation (IBM) and Dow Inc. (DOW), which offer more than 4% dividend yield, could be ideal additions to one’s portfolio now. These stocks have impressive payout histories and are Buy-rated in our proprietary rating system.

International Business Machines Corporation (IBM)

Armonk, N.Y.-based IBM provides integrated solutions and services worldwide. The company operates through five segments: Cloud & Cognitive Software; Global Business Services; Global Technology Services; Systems; and Global Financing.

On October 22, IBM and Acclivis Technologies and Solutions, a wholly-owned subsidiary of CITIC Telecom International Holdings, announced a collaboration to deploy IBM Cloud Satellite across Asia by leveraging Acclivis' regional data center footprint and cloud expertise. The companies plan to help accelerate digital innovation and deliver security-rich and open cloud services to the region. This should strengthen IBM’s presence considerably on the continent.

Also in October, IBM and Crédit Mutuel announced their latest step in their long-standing partnership with the signing of the AmbitionS contract between Euro-Information, the technological subsidiary of Crédit Mutuel, and IBM. The companies also developed a technology and skills center in Strasbourg. IBM expects this co-creation to strengthen the IBM teams in Strasbourg and access to IBM Research, consulting, support, and technology centers worldwide.

IBM’s $6.56 annual dividend yields 5.14% at the stock’s current price. IBM’s dividend payouts have increased at a 2.1% CAGR over the past three years. The company has a record of 22 consecutive years of dividend growth.

IBM’s total revenues increased marginally year-over-year to $17.62 billion in its fiscal third quarter, ended September 30. In addition, its revenue from the cloud & cognitive software segment rose 2.5% from the same period last year to $5.69 billion, while revenue from its global business services segment grew 11.7% year-over-year to $4.43 billion. Its adjusted free cash flow came in at $1.17 billion, reflecting a 6% increase year-over-year.

A $20.52 billion consensus revenue estimate for the current quarter indicates a 0.8% increase year-over-year. The Street expects the company’s EPS to rise 78.7% from the prior-year quarter to $3.70 in the current quarter. Furthermore, the company surpassed the Street’s EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 10% in price to close yesterday’s trading session at $127.64.

IBM has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

IBM also has a B grade for Value, Momentum, and Quality. It is ranked #5 out of the 51 stocks in the B-rated Technology – Hardware industry. Click here to view additional IBM ratings for Growth, Sentiment, and Stability.

Dow Inc. (DOW)

DOW provides various materials science solutions for the consumer care, infrastructure, and packaging markets in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. The Midland, Mich.-based company operates through Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials and Coatings segments.

In October, DOW and Crocs Inc., a global leader in innovative casual footwear, announced a collaboration in which DOW will supply bio-based materials for use in Crocs’ manufacturing process. Also, the company collaborated with Ralph Lauren Corporation (RL) to scale a less resource-intensive dyeing process. This demonstrates DOW’s commitment to environmental sustainability and its dominance in the industry.

On October 12, DOW announced a first-step agreement with Haldor Topsoe, a global leader in sustainable solutions, to develop a new 10 kiloton per year market development unit (MDU) for circular polyethylene from pyrolysis oil feedstock derived from waste plastics. This expansion is expected to scale up its purification capabilities and accelerate the scale needed to meet the growing market demand for circular polyethylene.

DOW’s $2.80 annual dividend yields 4.77% at the stock’s current price. On October 14, the company approved a $0.70 quarterly dividend, payable on December 10.

For its fiscal third quarter, ended September 30, DOW’s net sales increased 52.8% year-over-year to $14.84 billion. Its income before income taxes grew 5,252.4% from its year-ago value to $2.25 billion. Its net income available for common stockholders came in at $1.68 billion, indicating a 6,832% rise year-over-year. The company’s EPS increased 5,675% year-over-year to $2.23.

The Street expects DOW’s revenues to rise 28% year-over-year to $13.70 billion in the current quarter, ending December 2021. A $2.06 consensus EPS estimate for the current quarter indicates a 154.3% improvement year-over-year. Also, DOW has an impressive earnings surprise history; it has surpassed Street EPS estimates in each of the trailing four quarters.

DOW shares have gained 21% in price over the past year and 5.8% year-to-date to close yesterday’s trading session at $58.71.

It’s no surprise that DOW has an overall rating of B, which equates to Buy in our POWR Ratings system. DOW has a grade of A for Value, and a B for Quality. Among the 93 stocks in the B-rated Chemicals industry, DOW is ranked #25.

Get additional POWR Ratings for Growth, Stability, Momentum, and Sentiment here.

IBM shares were trading at $127.61 per share on Tuesday morning, down $0.03 (-0.02%). Year-to-date, IBM has gained 5.07%, versus a 23.71% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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