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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!