3 Unstoppable Dow Dividend Stocks to Buy and Hold Forever

Globe and Mail

6 days ago

Key Points
Artificial intelligence (AI) is boosting income and growth at networking giant Cisco Systems.
McDonald's, with nearly a half-century of rising dividends, will continue to enrich investors.
Challenges in the health insurance industry have boosted the dividend yield at UnitedHealth.
10 stocks we like better than Cisco Systems ›
The Dow Jones Industrial Average comprises 30 blue chip stocks that investors often regard as a proxy for the overall economy. Amidst that prominence, all but two of the 30 components return cash to shareholders, a move that tends to affirm that stability.
Still, investors may also want stock growth potential along with a strong dividend. To that end, these Dow stocks are well-positioned to deliver rising payouts without compromising potential returns from stock price growth.
1. Cisco Systems
After years of slow revenue increases, growth is finally speeding up for Cisco Systems (NASDAQ: CSCO). Coming off the networking giant's acquisition of Splunk, product orders are up 20% year over year (or 9% if not including Splunk). The growth comes as companies work to integrate AI into security and network management.
The rising orders should also bolster what has already served as a strong dividend. Its payout has risen every year since the company began offering dividends in 2011. At $1.64 per share annually, Cisco now has a dividend yield of 2.4%. That compares well to the S&P 500 's average yield of 1.2%.
More importantly, Cisco can likely sustain its dividend growth. In the first nine months of fiscal 2025 (ended April 26), it generated $9.3 billion in free cash flow, enough to cover the $4.8 billion in dividend costs over that period.
Investors have begun to take notice of the stock in recent months. The stock is up by nearly 50% over the last year, and its P/E ratio of 28 sits at multi-year highs. Despite that recent growth, that places the P/E ratio slightly under the S&P 500 average earnings multiple of 30, indicating there is likely still time to buy Cisco stock.
2. McDonald's
Dividend investors may also find a lot to like in McDonald's (NYSE: MCD) stock. Admittedly, that might not seem to be the case amid a sluggish economy and intense competition in the restaurant industry, and some investors may be leery of its 27 P/E ratio. However, since McDonald's actually profits from franchising, such challenges may have relatively little effect on its top line.
McDonald's earns most of its revenue from franchising fees and restaurant rentals from its extensive real estate portfolio. While it also claims a percentage of the revenue driven from these restaurants, it also means that restaurant sales have less of an effect on the company than rivals such as Chipotle Mexican Grill.
That stability contributes to the strength of its dividend, which has risen every year since its introduction in 1976. At $7.08 per share annually, it yields 2.3%. Furthermore, the payout appears sustainable, as its more than $6.7 billion in free cash flow covered the dividend costs of about $4.9 billion in 2024.
Additionally, the stock was up just over 20% over the last year. When combining that with returns on the dividend, investors appear to have a surprisingly robust growth and income stock in McDonald's.
3. UnitedHealth Group
When it comes to Dow dividend stocks, investors may have a unique buying opportunity in health insurer UnitedHealth Group (NYSE: UNH). The company offers health insurance to individuals, including Medicare and Medicaid recipients, as well as plans for employers.
Nonetheless, its stock has fallen by nearly 40%, as rising medical costs led to lower earnings guidance in the first quarter of 2025. The tragic shooting of CEO Brian Thompson also plagued the stock. Moreover, investigations by the Department of Justice and The New York Times have called some of its business practices into question. So severe was the drop in the stock price that the selling has wiped out almost all the stock's five-year gain.
Although such challenges tend to weigh on stocks, at least for a time, UnitedHealth should be positioned for recovery if it properly addresses those allegations. Additionally, the company's current stock price gives investors a tremendous incentive to take a position in the stock. Its P/E ratio has fallen to 13, its lowest point since 2013.
The decline has also boosted its dividend yield to 2.8%, close to all-time highs. With that, it is worth noting that the payout has risen for 15 straight years and now pays shareholders $8.84 per share annually.
Furthermore, despite rising costs, UnitedHealth's nearly $21 billion in free cash flow enabled it to meet its $7.5 billion in dividend costs in 2024. Hence, not only can UnitedHealth afford its generous, rising dividend, but investors also have a unique opportunity to buy this stock at an unusually low price. If one can tolerate its risks, the health insurance stock offers tremendous potential for growth.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Cisco Systems. The Motley Fool recommends UnitedHealth Group and recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.