Cash Crops -- Growing Dividends

10 Dividend Lions Roaring Now

A quick check suggests the stock market has left the recession in the dust. With the S&P 500 doubling in just 23 months, its quickest 100% rise ever, investors are giddy about growth prospects. Perhaps even better news than the growth opportunities is the strong return to dividends. Banks are allowed to increase payouts again and powerhouse firms are ready to return their cash hoards. Can’t you hear it? Today, the dividend lion rears its head and roars.

It seems like it would be hard for the most actively traded stock to tip-toe around the strong recovery, but that’s exactly what Citigroup (C) appears to be doing. After plummeting from $55 a share in 2007 to $1 in 2009, this global financial services company has only risen to about $4.50 since. The good news is that C will soon return to those middle-double digit prices seen before the recession; the bad news is it's going to do it by using a 10 for 1 reverse stock split. After the split, a tiny, better-than-nothing $0.01 dividend will be reinstated. Management says the real dividend returns will come in 2012. Okay, so not quite a roar yet, but with the upcoming 1% payout ratio, the dividend lion at least looks to wake up in the future.

JP Morgan Chase (JPM) quickly took advantage of allowable dividend increases by bumping its quarterly mark up to $0.25 from $0.05. This actually isn’t that far off from the pre-recession $0.38 quarterly payout. Add in the 5% payout ratio and the outlook for this financial powerhouse appears to be promising. The 2.1% current yield isn’t that attractive, but then again the $8 Billion common share buyback should be factored in to the shareholder value equation. Some might not be keen on the near 50% increase in CEO Jamie Dimon’s compensation during 2010 -- but to be fair, his year-to-year base salary did not change, just his stock option incentives.

From 1984 until 2008, Wells Fargo (WFC) enjoyed a stable history of increasing dividends. Then 2009 happened and its dividend was frozen at $0.05 per share. But confidence is up and payouts are on the rise. This banking giant makes up nearly 18% of Warren Buffett’s Berkshire Hathaway (BRK.B) portfolio, and Buffett himself predicted a substantial dividend increase this year. True to form, WFC issued a special dividend of $0.07 this March in addition to its $0.05 quarterly payout. It still lags greatly from the pre-recession $0.34 a quarter, but a tiny 9% payout ratio suggest returning more value to shareholders is on the way.

AT&T (T) is not a bank, but it is a “dividend champion,” having increased its payout for 27 straight years. With a current yield of 5.6% it certainly deserves to be mentioned in any dividend conversation. It went ex-dividend on April 6, so it is a bit late to catch this quarter’s payout. Still, this telecommunications company shows a bit of everything: High yield, sustainability (51% payout ratio) and growth opportunities if its bid for T-Mobile goes through. The 5% average five-year growth rate isn’t overly impressive, but you don’t need too much appreciation on top of the high yield. The current yield has dropped as of late, but if history turns out to be the map to the future, there shouldn’t be much concern.

Excited about telecommunication companies and high yields, but don’t think the AT&T deal will go through? You could always move down the list to Frontier Communications (FTR). FTR makes waves with its 9.3% current yield. Further, it has showed consistency in the past by paying the same $0.25 quarterly dividend for 23 quarters from 2004 to 2010.

Those saying it is too good to be true might be on to something though, as FTR’s 100%-plus payout ratio proved unsustainable. A dividend cut followed last September, dropping the per-share payment to $0.75 a year. Still, because it yields about three percentage points more than AT&T and Verizon (VZ), it might be worth a look.

Sure, banks are recovering and communications are flaunting big yields, but how about those recent gas prices? And if we’re talking gas, we need to be talking about the $425 Billion market cap of mega giant Exxon Mobile (XOM).

XOM, like T, is also a “dividend champion,” having not only paid but also increased its dividend for 28 straight years. The 2% current yield doesn’t do much for income investors, but the 28% payout ratio and near 9% five-year average dividend growth rate appear promising. XOM has been very consistent with its payout increases, so look for another increase this May. Additionally, the increase announcement has not yet taken place, so investors can benefit in two ways: First from the increase in yield on cost and second on the potential upside to positive news. Or if you just want to ride the gas wave to growth, forget the dividend history and go with XOM anyway.

If we’re talking about mega giants, we might as well throw in International Business Machines (IBM). The 1.6% current yield and near 52-week high price don’t do much in the way of saying, “Hey, I’m a dividend value” -- but hold on.

IBM is a member of the “dividend contender” list, having increased its payouts for 15 straight years. In recent years, this machine-turned-service company has not been hesitant in returning value to shareholders. In the last five years, IBM has grown dividends at an average rate of 26% each year. Factor in the 23% payout ratio and dividend investors can clearly see where future payouts will be coming from. Still not satisfied? IBM has been more than consistent with its increase announcements as well. Look for a 10% increase in your yield on cost if you buy in before the expected April 26 dividend increase announcement.

Speaking of dividend increase announcements, let’s take a look at Procter & Gamble (PG). PG is a powerhouse on the “dividend champion” scene, having increased its payouts for 54 straight years.

The 3.1% current yield is reasonable, but might get even better in the next month. PG looks to mirror IBM with an expected 10% increase to yield on cost. In the last four years, increase announcements have come on either the second Tuesday or the third Monday of April. Let’s call it April 18, the third Monday of April. The 53% payout ratio appears to be in line for this consistent consumer goods company. A near 12% average five-year dividend growth rate, coupled with the expected upcoming dividend increase announcement, make PG a play that everyone can see.

Avon Products Inc. (AVP): Small, but only when compared to IBM and XOM, this $12 Billion beauty product manufacturer comes in with a current yield of 3.4%.

AVP has increased its dividend for 22 straight years and can become a “dividend champion” in just three more. This New York-based firm has a notable Fortune 500 female CEO and an apparently sustainable 66% payout ratio. Perhaps a slight concern would be the decreasing dividend growth rate, nearing a 6% average over the last five years. Still, any growth on the current yield is icing for this strong niche company.

AVP products can’t be found in Wal-Mart Stores (WMT), but pretty much everything else can. WMT has been on the “dividend champion” list for quite some time now, having increased its dividend payouts for 37 straight years.

Interestingly, this low price superstore plays as a rich man’s favorite with Buffett and Bill Gates holding substantial stakes. Earlier in the year, the 2.3% yield might have spooked income investors, but a recent increase has lead to a much more acceptable 2.8% current yield. The low 33% payout ratio says "how do you do" to future sustainability, but more impressive is the recent dividend growth rates. In the last five years, payouts have increased by an average of over 15%. If we see that over the next five years, your yield on cost would double.

Dividends are coming back across the board; to be sure, this is just a sampling.

Bank Dividend Yields Soon to Beat CD Rates

Safety-minded investors have spent the last couple of years grumbling about bank CD rates, which have hovered slightly above ZERO percent since the bottom of our financial crisis. Investors will soon have an alternative to low CD rates if they're willing to get back into the stock market.

The Big Banks are about to increase their dividend payouts, and eventually those payouts will return to the levels of a few years ago. However, some smaller banks have never stopped offering high dividend yields. Consider First Niagara (symbol FNFG) with its dividend of well over 4%. Or New York Bancorp (NYB), which pays a higher rate. Or Hudson City (HCBK). All sound banks with great yields.

Moreover, these banks are possible takeover targets, though First Niagara is about to complete the acquisition of NewAlliance (NAL), a Connecticut bank with 88 branches.

Banks Are Poised to Pay Dividends After 3-Year Gap

Financial analysts say the nation’s largest banks are ready to begin restoring their dividends in the first half of the year, after a three-year pause to repair their damaged balance sheets. The reversal could put billions of dollars in the pockets of pension funds and retirees who had viewed bank shares as dependable sources of income.

Clues to how big a payout is in store could come as early as Friday, when JPMorgan Chase announces its 2010 financial performance, the first of many earnings reports to come over the next week from the likes of Bank of America, Citigroup, Goldman Sachs and Wells Fargo.

If the big banks deliver a second straight year of rising profits, as many analysts expect, the conditions would be in place for regulators to approve dividend increases by as early as March.

As the financial crisis worsened in 2008 and 2009, all but a handful of financial institutions cut their once-lucrative dividends to just pennies a share, hurting ordinary investors who had come to see them as sources of income. JPMorgan, for example, now has a dividend of 20 cents a share annually, down from $1.52 before the crisis.

Over all, the financial sector of the Standard & Poor’s 500-stock index paid out $51 billion in dividends in 2007. By 2010, that figure had shrunk to $19 billion.

“It’s a significant milestone,” said Gerard Cassidy, a veteran bank analyst at RBC Capital Markets. “The return of dividends signals that the banks are back, and the Federal Reserve wants to inspire confidence in the marketplace so that banks lend more.”

The financial industry has returned to health much faster than expected, helped by an alphabet soup of federal aid programs totaling more than $3 trillion, ultralow interest rates and a surging stock market.

Banks are expected to record $70 billion in profits in 2010, according to Foresight Analytics, a financial research firm. That would be up from $12.5 billion in 2009 but remains about half the level reached in 2006, before the housing market collapsed and the financial system almost came undone.

The earnings reports for the fourth quarter of 2010 are also likely to show that corporate and consumer lending is starting to come back while losses on bad loans are continuing to ease.

Wall Street’s trading businesses are expected to turn in a strong performance because of an increase in deal-making activity late in the year.

This week the Federal Reserve began another round of so-called stress tests of the nation’s 19 largest banks, evaluating their ability to remain financially healthy in the face of a still-anemic economic recovery and tough new regulations that will cut deeply into revenues. Unlike the first round of tests, the findings this time will not be made public.

Before approving a dividend increase, regulators must sign off on a bank’s stress test and conclude that the bank can meet the higher capital requirements put in place by new international agreements and the recent overhaul of financial regulations in the United States. They also must have fully repaid any federal bailout funds they accepted at the height of the crisis.

While the return of dividends will be welcomed by ordinary investors, it remains a delicate issue for the banks as well as regulators and politicians in Washington, said Chris Kotowski, a bank analyst with Oppenheimer.

Many voters are still angry about the government-led bailout that rescued banks after the collapse of Lehman Brothers in 2008. More recently, the return of bonuses on Wall Street has stirred outrage.

“It’s purely a matter of making it palatable to the public,” Mr. Kotowski said. “Banks are fully capable of doing it. But everyone’s afraid of headlines that say just two years after the bailout, the fat cats are getting dividends again.”

Partly as a result, he said, dividends will probably be restored in stages, and it could be take until the end of 2012 for them to return to historical norms.

For decades, shares of banks, along with utilities, were the favored choice of retirees and other conservative investors who looked forward to a steady payment each quarter.

That all changed when the financial crisis struck, forcing Citigroup to cut its dividend as it braced for a wave of huge losses tied to loan defaults.

Although the federal bailout program did not require banks to lower their dividends in most cases, regulators all but forced many banks into making cuts by insisting that they hold more capital in reserve to cushion against losses.

By the spring of 2009, several of the largest banks — including JPMorgan, Bank of America and Wells Fargo — cut their dividend to just pennies a share each quarter.

Just as the banks cut their dividends at different rates over the course of months, the timing of dividend increases will probably also vary widely across the industry. The strongest banks, including JPMorgan, State Street, U.S. Bancorp and Wells Fargo, should be in the first wave this spring, several analysts said.

For Bank of America and Citigroup, which continue to suffer steep losses on mortgages and consumer loans, the analysts said higher dividends probably would not come until later this year or early next year.

Several regional lenders, including Fifth Third Bank, KeyCorp, SunTrust and Regions Financial, are barred by regulators from raising their dividends. None of these banks have repaid their bailout money in full.

In particular, analysts and investors are eagerly anticipating what the chief executive of JPMorgan, Jamie Dimon, will say on the company’s earnings call on Friday, looking for any hint of the bank’s dividend plan. JPMorgan emerged from the financial crisis in far better shape than most of its rivals, and Mr. Dimon has been outspoken about his desire to raise his company’s payout.

“We’re going to be building up a lot of excess capital,” he said in a CNBC interview on Tuesday. “So, we would like to restart a dividend.”

Eventually, JPMorgan’s restored dividend could equal $1.50 a share annually, said Michael Scanlon, senior equity analyst with Manulife Asset Management in Boston. That would equal a yield of 3.3 percent based on its closing price of $44.45 on Thursday.

That would be up from 0.5 percent now. More important, it would catapult the yield on JPMorgan shares to far above the 2.26 percent yield on certificates of deposit, a popular vehicle for investors seeking income.

“It won’t come right out of the chute at that level,” Mr. Scanlon said. “But it’s definitely the end of a long drought.”

BP -- Soon to become a Dividend Play

The media hysteria over the Gulf of Mexico oil leak led to shrieks and wails about extraordinary damages and overwhelming clean-up costs. However, with the leak sealed and most of the oil already removed from the water, it's clear the costs of the episode will drop well below $20 billion. All the affected businesses will resume relatively normal operations more quickly than expected. Interestingly, with an end to the clean-up, many boat operators will see their incomes drop. One of the ironies of the oil leak is this: the pay for removing oil was higher than the pay most operators were earning from fishing and their other maritime enterprises.

BP Tells Analysts Spill Claims May Be Lower Than $20 Billion

Sep 13, 2010 7:29 AM ET

BP Plc, responsible for the largest oil spill in U.S. history, told analysts that legal claims may be lower than the $20 billion it is setting aside for victims of the Gulf of Mexico disaster.

Robert Dudley, who takes over as chief executive officer from Tony Hayward on Oct. 1, said that the $32 billion provision for the spill is still the most reasonable estimate of the total cost, according to Mark C. Fletcher, an analyst at Citigroup Inc. who attended the meeting with Dudley last week.

Dudley said that given current estimates of claims the $20 billion Independent Claim Fund probably exceeds calls, Fletcher wrote in an e-mailed note today. Dudley also told analysts that state claims, which aren’t included in the fund, shouldn’t be too high, Fletcher said.

BP may resume paying dividends for the fourth quarter of this year after canceling three quarters of payouts to shareholders to free up funds for the spill, though they won’t be as much as before the incident, according to Fletcher. Dudley said July 27 that the company won’t “rush back into the same dividend philosophy” and didn’t indicate whether the company would make a payout for the fourth quarter of 2010.

Toby Odone, a spokesman for BP, said he couldn’t confirm Dudley’s statements. BP executives regularly meet with investors throughout the year, Odone said.

The company may wait until the first quarter to resume dividends, Sanford C. Bernstein & Co. said today in a separate note. BP will also need to complete the sale of as much as $30 billion of assets over the next 18 months to start making payouts, Bernstein said.

“BP’s cashflow position should be just strong enough to support restoration of dividends by the first quarter of 2011, under an $80 a barrel oil price scenario based on estimates,” analysts Oswald Clint and Iain Pyle wrote. “This assumes divestments are completed and the spill costs do not climb much above BP’s $32.2 billion estimate.”

BP is unlikely to sell more assets than announced or break up the company, Bernstein said. The analysts rate BP “market perform,” though production growth will probably lag behind peers Royal Dutch Shell Plc and Total SA, according to the note.

Pitney Bowes: The Dividend Check is in the Mail

Pitney Bowes: A Very Attractive Yield and a Promising Future

Pitney Bowes (PBI), with a yield of more than 7%, offers investors the fourth highest yield among S&P 500 stocks. At over 7%, the yield is at junk-bond levels. But the company is far more solid than its high yield suggests.

PBI is well known for providing businesses with equipment to handle their mail, both incoming and outgoing. It's true that Pitney Bowes has felt the impact of email and computer-related mail services. The traditional mail business is declining, but is far from disappearing like the Pony Express. Companies are managing their mail more efficiently and they're managing with software, hardware and services from Pitney Bowes.

PBI is working with leading companies, such as Hewlett-Packard (HPQ) and Kodak (EK), to help customers reduce paper volumes and improve productivity. Last year PBI announced a new distribution agreement with Digital China. The new alliance is bringing mailing solutions from PBI to Chinese businesses though more than 5000 resellers in 600 cities in China (after signing similar agreements in Japan and India).

Last year was a down year. Sales dropped 11% to $5.6 billion and EPS fell to the low $2 area. However, the company's balance sheet is strong. Healthy cash flow has allowed PBI to repurchase its stoack and increase the dividend. Last year the company reduced long term debt by $250 million.

After a disappointing Q2, full-year 2010 results were guided lower. The global economy and business environment have not stabilized fast enough for the company to see improved results this year. The company believes 2010 revenue will, at best, match last year's figure. However, analysts have suggested the top line might decline by 3%. Excluding non-recurring items, earnings per-share for the year are estimated at $2.10-2.30, while GAAP earnings should fall between $1.49-1.85 (the bulk of the difference is due to a one time restructuring and asset impairments recognized in Q2).

However, for 2010 cash flow guidance was increased $50 million to $700 million-$800 million. The company is optimistic about long term growth. PBI is forecasting revenues will grow 2-5% annually (2009 to 2013) and Earnings Before Interest and Taxes (EBIT) is forecasted to grow 6-8% annually. If these projections prove accurate then it is likely EPS will rise to $2.75 EPS in 2013.

Nevertheless, this stock, as the high dividend suggests, carries some risks. If the economy remains in a weakened state, the company may decide it must conserve cash, which implies it may cut the dividend. Moreover, it appears that EPS above $2 is the threshold for increasing the dividend. Those earnings may not arrive soon enough.

However, the key to higher growth is likely to be found in opening new markets. Many corporations expect to profit from operations in China and India, which are home to a total of almost 3 billion people, most of whom will send letters through their national Post Offices for a long time before they switch to e-mail.

Progress in the Gulf Oil Leak

BP stock is trading about $45 a share, giving the company a market capitalization of $140 billion. Last month, before the explosion and start of the leak, the stock was at $60 and the company had a market cap of $188 billion.

The nightmare for BP has lowered its market cap by $48 billion. Is the company really headed for a hit that large? Not according to any credible sources.

Maybe that means now is a good time to buy BP shares. Based on today's price, the dividend yield is 7.9%. Thus, investors will enjoy significant income while they watch the stock price inch up again.

BP Has ‘Some Success’ in Bid to Halt Leak, U.S. Says

May 27 (Bloomberg) -- BP Plc temporarily stopped the flow from a leaking well in the Gulf of Mexico, indicating progress on its plans to plug a well that’s been spewing oil for more than a month, U.S. Coast Guard Admiral Thad Allen said.

“They’ve had some success overnight,” Allen, National Incident Commander for the spill, said in an interview on WWL radio in New Orleans today. “Everybody is cautiously optimistic, but there’s no reason to declare victory yet.”

The company began pumping mud-like drilling fluid into the well at 2 p.m. New York time yesterday in a procedure known as “top kill.” BP will need another 24 hours before it can be “sure of success” for the process, Robert Dudley, managing director for the London-based company, said on NBC’s “Today” show this morning.

Success of top kill would bring to an end a leak that has poured an estimated 22 million gallons of oil into the Gulf and soiled 100 miles (161 kilometers) of coast. BP rose 28.8 pence, or 5.9 percent, to 520.8 pence at 4:35 p.m. in London trading.

The process uses the drilling fluid to “arm wrestle” the gusher of oil and natural gas back into the well, said Dudley, and then allow engineers to seal it with cement. BP has halted the flow of oil and gas and now must drop the pressure in the well to zero for the seal, Allen said.

Shares Rise

BP jumped as much as 6.6 percent in London trading after the Los Angeles Times quoted Allen as saying that the top kill had succeeded. The Coast Guard issued a “technical clarification” in an e-mail, saying the temporary halt in flow doesn’t mean the effort was successful.

“The operation is ongoing, we’re not giving a commentary on it,” David Nicholas, a BP spokesman in Houston, said in a telephone interview.

The well began leaking after an April 20 explosion and fire on the Deepwater Horizon drilling rig. BP leased the rig from Geneva-based Transocean Ltd., the largest deep-water driller.

Transocean rose as much as 9.1 percent today. The shares gained $3.47, or 5.9 percent, to $62.05 at 11:38 a.m. in New York Stock Exchange composite trading. Halliburton Co., which provided services on the rig, rose $1.29, or 5 percent, to $27.08. Cameron International Corp., which provided equipment to the rig, rose $1.60, or 4.4 percent, to $37.68.

Anadarko Petroleum Corp., which owns a 25 percent stake in the well, rose $3.40, or 6.4 percent, to $56.74.

Junk Shot

“It will be Friday night or Saturday at the earliest before we know definitively that the well has been killed,” Robert MacKenzie, a Houston-based analyst for FBR Capital Markets, wrote today in a note to clients. “They are in the process of mixing more mud or perhaps even a junk shot to pump before they switch to cement to seal the well.”

BP has said a “junk shot” injection of rubber scraps, may be used as needed to seal leaks in the well piping so that enough pressure can be exerted on the column of oil and gas.

A plume from the spill may reach northeast 22 miles toward Mobile, Alabama, a research vessel from the University of South Florida found in a preliminary report. The Weatherbird II made initial tests that show the highest concentrations of “dissolved hydrocarbons” were 400 meters underwater.

Congress has scheduled at least 20 hearings on the Deepwater Horizon and offshore drilling since the incident, and the Minerals Management Service and Coast Guard held another day of hearings in Louisiana on the explosion and sinking of the rig.

Drilling Delay

President Barack Obama today extended by six months a moratorium that began after oil started to spill from BP’s well. The president also canceled a proposal to drill for oil off the coast of Virginia and planned drilling by Royal Dutch Shell Plc of exploratory wells in the Arctic off Alaska.

Obama said the changes were the result of a 30-day safety review on offshore drilling the president ordered from Interior Secretary Ken Salazar.

The well may have leaked more than twice the oil that the Exxon Valdez spilled in 1989, according to figures from a U.S. government panel.

The BP well may have gushed 12,000 to 19,000 barrels a day, Marcia McNutt, director of the U.S. Geological Survey, said today in a conference call. Based on the midpoint of the estimates released by the Flow Rate Technical Group, the well may have leaked about 527,000 barrels from April 22, when the rig sank, through yesterday. That is more than double the Exxon Valdez’s 257,000-barrel spill in Alaska.

The amount of oil being spilled will help determine BP’s liability for the leak.

Spill Costs

The spill has cost BP a total of $760 million, or about $22 million a day, the company said May 24. Average daily profit last year was $45 million a day, according to data compiled by Bloomberg.

The federal government has spent more than $100 million responding to the spill and will be reimbursed by BP, Landry of the Coast Guard said.

BP said yesterday in an e-mailed statement it has paid more than $36 million in damage claims and will appoint an independent mediator to review and assist claims.

The leaking well can be permanently sealed only by one of two relief wells it’s drilling, which won’t be complete before August.

If the top of the well can’t be plugged, the company plans to replace the damaged riser pipe at the well. That requires cutting away a kink in the existing pipe, at least temporarily increasing the size of the leak, BP Senior Vice President Kent Wells said May 25.

The top kill “procedure has not been carried out in 5,000- feet (1,524-meter) water depth before and BP has stressed its success cannot be assured,” Andrew Whittock, an analyst in London at Oriel Securities Ltd., said in a note yesterday. “Many commentators believe the chance of success is less than 50 percent.”

En-Dow-ed with Dividends

6 Dow Dividend Stocks That Are Thriving in 2010

Investors looking for dividend stocks among the Dow Jones components should consider Verizon (VZ) and AT&T (T). After all, these two telecom giants offer the highest yields of the 30 Dow stocks. However, despite their near 7% dividend yields, both stocks have been disappointments for income investors this year. Sure, their quarterly dividend payments have been generous, but this year Verizon’s stock has fallen over 9% and AT&T isn’t far behind with a drop of nearly a 6%. Meanwhile, the Dow Jones index has gained over 5% in 2010.

However, as Bernard Baruch said, "I buy my straw hats in winter." Thus, patient investors might enjoy substantial gains if they acquire these shares while it appears they are on sale.

Even though investing in the highest yielding Dow dividend stocks has led to subpar returns in 2010, that alone is no reason for investors to avoid stocks with high yields altogether. In fact, 9 out of the 12 highest yielding dividend stocks in the Dow have posted gains this year. Six Dow dividend stocks have already posted gains of over 10% from share-price appreciation this year. Their hefty dividen yields push their total-return figures even higher.

DuPont (DD)

DuPont investors have seen its seen stock price climb over about 15% since the beginning of the year. Meanwhile, the stock currently pays a quarterly dividend of 41 cents, which gives Dupont shares a current yield of 4.2%.

Home Depot (HD)

Home Depot’s stock price has been climbing steadily higher since reporting earnings in February. The stock has gained 15% since the beginning of 2010, but still yields 2.8%.

Caterpillar (CAT)

Even with a 15% gain in its stock price this year, Caterpillar still offers a 2.6% dividend yield. Growth prospects at this industrial firm appear bright as well, with analysts expecting earnings to grow by 22% this year and 49% in 2011.

Kraft Foods (KFT)

Kraft is the 4th highest yielding stock in the Dow index with a 3.8% dividend yield. In 2010, investors have not only enjoyed this stock's hefty yield, but also the 11% gain in the stock price.

Intel (INTC)

Intel increased its quarterly dividend by 12.5% in January and currently offers investors a 2.8% yield. Dividend-growth investors are not only happy with the dividend increase, but also the 11% jump in Intel’s share price this year.

McDonald’s (MCD)

Since 2006, McDonald’s has been the top performing stock in the Dow Jones index. The stock gained 86% during that period. Meanwhile the stock has risen 10% in 2010, which means the fast food chain is offering investors a 3.2% dividend yield. Moreover, the company has increased its dividend every year since 1976.

Don’t be fooled by AT&T and Verizon’s subpar performances this year -- high yielding Dow dividend stocks are thriving in 2010.