Should You Buy the 3 Highest-Paying Dividend Stocks in the Dow Jones?

Key Points

• Verizon, Chevron, and Merck are the highest-yielding stocks among the Dow 30.

• Verizon leads the pack with its 6.3% yield, and it hiked its dividend last month.

• Chevron and Merck have near-term margin concerns, but both also have long streaks of sustainable if not rising distributions.

• 10 stocks we like better than Verizon Communications ›

Verizon (NYSE: VZ) is currently the highest-yielding stock in the Dow Jones Industrial Average (DJINDICES: ^DJI), and it isn't even close. The wireless carrier is shelling out 6.3% of its market cap a year to its shareholders, 200 basis points higher than any of the 29 other stocks in the iconic index.

Chevron (NYSE: CVX) and Merck (NYSE: MRK) are the only other Dow 30 components yielding north of 4%. With the leading money market rates now buckling below the 4% mark, it could be a good time for income investors to consider high-yielding Dow stocks. The risks are clearly there in swapping fixed-income investments for equities, but the ideal scenario in the process is the upside of the potential capital appreciation.

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Let's take a closer look at the three Dow stocks with the chunkiest payouts. Sometimes the risks outweigh the potential rewards.

1. Verizon: 6.3% yield

Slow growth and high yields aren't typically a good combination, but Verizon is making it work. Despite failing to top 6% revenue growth for 15 consecutive years, Verizon extended its streak of annual dividend hikes to 19 last month.

Verizon is the country's leading wireless carrier, with 146.1 million consumer and business accounts at the end of its latest quarter. Revenue isn't expected to accelerate anytime soon. Analysts see revenue rising shy of 3% this year and next year. However, Verizon has delivered consistent beats on the bottom line over the past year.

Growth catalysts haven't panned out. The major investments that Verizon and its peers made in 5G technology and other infrastructure updates didn't lead to a pop in customers willing to pay more for speedy connections. Investors can afford to wait, even with Verizon's sizable debt. It's trading for just 9 times this year's earnings. Verizon won't have a problem delivering on its Dow-leading payout or hiking it again next September.

Image source: Getty Images.

2. Chevron: 4.3% yield

This isn't a great time for the oil industry. Supply is outstripping demand, as OPEC nations boost production and domestic shale drilling are creating a glut. The leading oil companies are resorting to paring back capital spending or scaling back their work force. Chevron announced back in February that it expects to lay off 15% to 20% of its global workforce by the end of next year.

Chevron's trailing revenue of $189.3 billion is 20% below where it was back in 2022. Profitability has been cut in half. Despite the grim portrait and many forecasting oil prices to continue heading lower, Chevron is sticking to its generous quarterly distributions. It hasn't cut its dividend since 1934, boosting its annual rate in each of the last 38 years.

It's problematic with the bottom line sliding for the third year in a row. Chevron's payout ratio is currently 86%, challenging the company's ability to continue returning more money to its shareholders every passing year through dividends and stock buybacks. Analysts see a healthy rebound in revenue and earnings next year, but that's going to be difficult to achieve if industry fundamentals continue to backpedal in 2026.

3. Merck: 4.1% yield

Shares of Merck soared 7% on Monday, as drugmakers rallied on news of a breakthrough in tariff negotiations. The rub is that apparently the key to securing at least three years of sidestepping hefty U.S. tariffs on pharmaceuticals involves a commitment to slashing prices.

Wall Street is cheering the potential passing of gray clouds, but what will that do to the bottom line of pharmaceutical companies that rely on hefty markups in the U.S. market? More to Merck's situation, analysts see revenue rising less than 1% this year, its third consecutive year of uninspiring single-digit growth.

The good news on the dividend front is that its payout ratio is currently below 50%. It has enough wiggle room to weather margin contraction. It has just three more years of patent protection for flagship cancer treatment Keytruda, so its bigger concern may be its pipeline rather than the tariff situation.

Should you invest $1,000 in Verizon Communications right now?

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Rick Munarriz has positions in Verizon Communications. The Motley Fool has positions in and recommends Chevron and Merck. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.