4 Dow Stocks Whose Investors Deserve a Raise: Bank of America Corp (BAC), American Express Company (AXP), Alcoa Inc (AA) & More

Page 1 of 2

The 30 stocks in the Dow Jones have a number of attractive features. Not only do the companies represent the leaders in their respective industries, but their businesses also have shown great success over the years, making them a good starting point for investors looking to start or add to a portfolio of individual stocks.

One consequence of the high quality of the Dow’s components is that they produce enough income from their respective businesses to support paying dividends to their investors. Yet while all 30 Dow components pay a dividend, some of the companies are stingier about their payouts than others. Today, I’m taking a closer look at the four stocks in the Dow that have the lowest dividend yields, with an eye toward figuring out whether it’s likely that they’ll reward investors more in the near future.

Bank of America Corp (NYSE:BAC) , 0.4% dividend yield
Ever since the financial crisis, Bank of America Corp has paid as little as possible to its shareholders in dividends: a single penny per share each quarter. But B of A hasn’t had control of its dividend destiny. In 2011, the Federal Reserve submitted a request to the Federal Reserve to raise its dividend, but the Fed denied it.

Now, though, the bank has come a long way, making strategic divestitures of assets to raise capital and build a healthier balance sheet. With stress test results due out this Thursday and the Fed’s Comprehensive Capital Analysis and Review the following week, B of A may finally get permission to boost its payout and get out of the Dow’s dividend basement.

American Express Company (NYSE:AXP) , 1.3% yield
For a company that relies on having its customers spend money, American Express has been pretty stingy with its own capital. Although the company boosted its dividend in early 2012, that increase was its first since early 2008. Moreover, AmEx certainly has the financial capacity to up its payout; it pays only about 20% of its earnings to shareholders. Moreover, this is the time of year when AmEx would traditionally consider a raise.

A look at AmEx’s industry peers, however, shows that AmEx actually tops the puny yields of Visa and MasterCard by a fair margin. AmEx prefers to use share buybacks to return capital, as last year’s decision to authorize a $5 billion share repurchase indicates. Moreover, with the demands of investing in new areas like mobile payments, it’s understandable for AmEx not to pay a huge dividend — and it seems likely that the recent rise in dividend tax rates will serve as a greater excuse not to raise payouts too far.

Alcoa Inc (NYSE:AA) , 1.4% yield
Alcoa hasn’t changed its tiny $0.03-per-share quarterly dividend in the four years following its draconian payout cut, which sliced nearly 80% off its former dividend. Unlike most of the other components of the Dow, Alcoa has simply never recovered from the market meltdown in 2008, as conditions in the global construction and infrastructure industry haven’t been strong enough to boost aluminum demand and get rid of a troublesome glut of the metal that has held prices down.

Moreover, Alcoa has made other use of its capital, looking at strategic acquisitions of promising assets at fire-sale prices. Although risky, the moves could well pay off in the long run. But until prices recover, Alcoa won’t be in any position to raise its dividend anytime soon.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!