As we approach the end of 2024, it is evident that the Dow Jones Industrial Average is likely to underperform the S&P 500 and the Nasdaq Composite for the year. While the Dow has shown a respectable total return of 68.2% over the last five years, it falls short compared to the S&P 500’s 102.8% and the Nasdaq’s 132.7% total return during the same period. Despite this underperformance, Dow stocks remain attractive for investors seeking quality blue-chip companies that pay dividends. These companies are industry leaders with proven track records of earnings growth, making them less volatile investments compared to growth stocks.
For investors looking to generate passive income from Dow stocks, three companies stand out: McDonald’s, The Home Depot, and Chevron. By investing $3,500 into each of these Dow stocks, investors can expect to generate over $325 in passive income in 2025, with the potential for even higher dividend income in the future as these companies continue to raise their payouts annually. Let’s delve into why these three companies are balanced buys for investors in 2025.
McDonald’s, a global fast-food giant, has a unique business model where it operates only a small percentage of its stores and franchises the rest. Despite facing challenges such as flat systemwide sales and a recent E. coli outbreak, McDonald’s remains a compelling investment opportunity. The company has a strong track record of dividend increases, with 48 consecutive years of raising dividends. With a dividend yield of 2.4% and a reasonable price-to-earnings ratio of 25.8, McDonald’s presents itself as a solid dividend stock to buy in 2025. The company’s loyalty program is gaining momentum, with a projected 250 million active users by the end of 2027, indicating potential growth in customer engagement.
The Home Depot, a leading home improvement retailer, has experienced a slowdown in recent years due to macroeconomic factors such as higher interest rates impacting home sales and consumer spending. Despite this, Home Depot remains a solid business with a growing dividend. With a dividend yield of 2.3% and a price-to-earnings ratio of 26.8, Home Depot offers investors a balanced blue-chip dividend stock to buy now. The company has increased its dividend significantly over the last decade and has a track record of market-beating returns, making it an attractive investment option for 2025.
Chevron, a major player in the energy sector, has faced challenges with declining oil prices and economic uncertainty. However, Chevron stands out as a compelling dividend stock to buy now, with a dividend yield of 4.6% and 37 consecutive years of dividend raises. The company has implemented cost-saving measures and invested in high-margin regions to support its dividend even at lower oil prices. Despite uncertainties surrounding its deal with Hess, Chevron’s strong balance sheet and attractive valuation make it an excellent high-yield dividend stock for investors in 2025.
In conclusion, while the Dow Jones Industrial Average may underperform the S&P 500 and the Nasdaq Composite in 2024, Dow stocks such as McDonald’s, The Home Depot, and Chevron offer investors the opportunity to generate passive income through dividends. These blue-chip companies with solid track records and attractive valuations make them balanced buys for investors looking for stability and income in their portfolios.
