The 3 Top 'Dogs of the Dow' for 2025

The “Dogs of the Dow” strategy consists of investing in the highest-yielding stocks in the Dow Jones Industrial Average. Purchasing the Dogs of the Dow creates higher dividend income, by focusing on high-yielding stocks.

The following three stocks are currently the top Dogs of the Dow. They are not only the highest-yielding Dow stocks, but they also have dividend growth potential in the years ahead.

Top Dog #1

Verizon Communications VZ is a communication services stock and is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.

On January 24, Verizon announced fourth-quarter and full-year results for the period ending December 31, 2024. For the quarter, revenue grew 1.7% to $35.7 billion, which beat estimates by $360 million. Adjusted earnings per share of $1.10 compared favorably to $1.08 in the prior year and was in-line with expectations.

For the year, revenue grew 0.6% to $134.8 billion while adjusted EPS of $4.59 compared to $4.71 in 2023. For the quarter, Verizon had postpaid phone net additions of 568,000, which was better than the 449,000 net additions the company had in the same period last year. Retail postpaid net additions totaled 426,000. Wireless retail postpaid phone churn rate remains low at 0.89%.

Wireless revenue grew 3.1% to $20.0 billion while the Consumer segment increased 2.2% to $27.6 billion. Broadband totaled 408,000 net new customers during the period, the 10th consecutive quarter of at least 375,000 net adds.

Verizon provided guidance for 2025 as well, with the company expecting wireless service revenue to grow 2% to 2.8% for the year.

One of Verizon’s key competitive advantages is that is often considered the best wireless carrier in the U.S. This is evidenced by the company’s wireless net additions and very low churn rate. This reliable service allows Verizon to maintain its customer base as well as give the company an opportunity to move customers to higher-priced plans. Verizon’s 5G service coverage area gives it an advantage over other carriers.

The strong free cash flow of the company fuels its high dividend payout. Verizon has increased its dividend for 20 consecutive years. 

VZ stock currently yields 6.4%.

Top Dog #2

Chevron CVX is the fourth-largest oil major in the world based on its market cap. Chevron is more leveraged to the oil price, with a 57/43 production ratio split between oil and natural gas. Moreover, as Chevron prices some natural gas volumes based on the oil price, nearly 75% of its output is priced based on the oil price. As a result, Chevron is more leveraged to the oil price than the other oil majors.

In late January, Chevron reported results for the fourth quarter of 2024. Production dipped -1% over the prior year’s quarter due to downtime in some fields, despite record Permian output after the acquisition of PDC Energy. In addition, the price of oil decreased and refining margins plunged to normal levels after two years of blowout levels.

As a result, EPS fell 40%, from $3.45 to $2.06, missing the analysts’ consensus by $0.05. On the bright side, Chevron is likely to post solid production growth this year thanks to strong momentum in the Permian Basin.

Future growth will be fueled organically as well as a recent, huge acquisition. In 2023, Chevron acquired Hess for $53 billion in an all-stock deal. Thanks to this deal, Chevron will purchase the highly profitable Stabroek block in Guyana and Bakken assets and will greatly enhance its production and its free cash flow.

Chevron is likely to return to growth mode this year thanks to its sustained growth in the Permian Basin and in Australia. The company has more than doubled the value of its assets in the Permian in the last four years thanks to new discoveries and technological advances.

In addition, thanks to the high grading of its asset portfolio, Chevron can fund its dividend even at an oil price of $40.

Chevron’s main competitive advantage is its size and industry position. The company achieved record free cash flows in 2021-2023. Chevron raised its dividend by 5% early this year and is likely to keep raising its dividend in the upcoming years, albeit at a modest pace.

Chevron is a member of the exclusive Dividend Aristocrats list thanks to its 38 consecutive years of dividend increases. 

CVX shares currently yield 4.3%.

Top Dog #3

Merck & Co. MRK is one of the largest healthcare companies in the world. Merck manufactures prescription medicines, vaccines, biologic therapies, and animal health products. Merck employs 71,000 people around the world and generates annual revenues of more than $65 billion.

On February 4, Merck announced fourth-quarter and full-year results for the period ending December 31, 2024. For the quarter, revenue improved 7% to $15.6 billion, which was $110 million above estimates. Adjusted EPS was $1.72 compared to $0.03 the prior year and $0.04 more than expected.

For the year, revenue increased 7% to $64.2 billion while adjusted EPS of $7.65. Keytruda, which treats cancers such as melanoma that cannot be removed by surgery and non-small cell lung cancer, continues to be the key driver of growth for the company as sales for the drug were up 19% to $7.8 billion during the period.

The product generated $29.5 billion in 2024, up from $25 billion in 2023 and $20.9 billion in 2022. Sales for Merck’s HPV vaccine Gardasil declined 17% to $1.6 billion, mostly due to lower demand in China, partially offset by gains in Japan. Animal Health grew 9% to $1.4 billion due to higher prices for both Livestock and Companion Animal products.

Future growth will be fueled by new products. Merck provided guidance for 2025 as well, with the company expecting sales in a range of $64.1 billion to $65.6 billion. Adjusted EPS are projected to be in a range of $8.88 to $9.23 for the year. 

Acquisitions will help boost future growth. For example, in 2024, Merck completed its $1.3 billion purchase of EyeBio, which has a pipeline of drug candidates that target retinal diseases.

Keytruda has shown very high rates of growth and has patent protection in the U.S. until 2028, in the European Union until 2030, and in Japan until 2032.

The company has increased its dividend for 14 consecutive years.

MRK stock currently yields 3.7%.

At the time of publication, Ciura had no positions in any stocks mentioned.