The 30 stocks in the
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.