What Is the Dow Jones Industrial Average (DJIA) Yield?
The Dow Jones Industrial Average (DJIA) yield is the aggregate dividend yield on the 30 stocks that make up the Dow Jones Industrial Average (DJIA). The yield is dividend distributions divided by the index value divided by the Dow Divisor.
- The DJIA yield is the dividend yield of the 30 stocks that make up the DJIA.
- The DJIA yield is calculated as dividend distributions divided by the index value divided by the Dow Divisor.
- The DJIA yield will change as the company's within the index change, their weighting within the index changes, the index value changes, or the dividend policy of any of the 30 companies changes.
- Between 2010 and 2020, the DJIA yield fluctuated mostly between 2% and 3%.
The Dow Jones Industrial Average
Understanding the Dow Jones Industrial Average (DJIA) Yield
The DJIA is no longer a purely industrial index; today's DJIA contains healthcare, technology, and financial companies, which traditionally pay lower dividends than mature, industrial-based stocks.
The Dow contains 30 stocks that are changed from time-to-time when required. Stocks that are included have a high reputation, sustained growth, and are of interest to a wide array of investors.
Many of these stocks pay a dividend, typically quarterly, which is a portion of the company's earnings distributed to shareholders. Some companies pay more than others, and some may pay no dividends at all.
The DJIA yield is posted on financial sites. Yield and data are sometimes easier to find on an exchange-traded fund (ETF) that tracks the Dow, such as the SPDR Dow Jones Industrial Average ETF Trust (DIA).
"Dogs of the Dow" is an investment strategy that focuses on picking the top ten highest dividend-yielding stocks of the year.
The yield will fluctuate as dividends are increased or decreased by the companies within the index, as companies within the index change, as weightings within the index change, and also as the price of the ETF or index changes since a stock's yield is calculated by dividing dividends paid by price.
History of the Dow Jones Industrial Average (DJIA) Yield
Between 1999 and 2009, the Dow dividend yield has fluctuated from just above 1% in late 1999 to above 4% in early 2009. Between 2010 and early 2020, the yield stayed largely between 2% and 3%.
When the index moves down substantially, as it did in 2008 and early 2009, this tends to drive up the dividend yield. As stock prices fall, companies may not cut their dividend immediately. Dividend payouts stay the same, but the price paid for those dividends (the index) is now cheaper.
When the Dow is moving up or sideways, especially coming out of a recession, the dividend yield may rise. This is because companies are doing better and may start increasing their dividends. If this dividend growth outpaces the rise in the index, the yield will increase.
When the index is accelerating to the upside, dividend increases usually don't keep pace, and so the yield begins to drop. Even if dividend payouts are rising, if the index is increasing more, the yield will drop.
The following chart shows the price graph of the SPDR Dow Jones Industrial Average ETF Trust (DIA), as well as the dividend payouts and dividend yield between January 1999 and March of 2020.
As of Sept. 9, 2020, the SPDR Dow Jones Industrial Average ETF Trust (DIA) offers a yield of 2.04%, according to Google's Market Summary. Assuming no change in the index or dividend payouts, if an investor purchased DIA at $279.85—the closing price on that day—they could expect to make 2.04% in dividends per year.
If the index falls from this level, and dividends and the stocks in the index stay the same, the yield will rise. If dividends and stocks in the index stay the same while the index rises, the yield will drop.
For other scenarios, the yield will depend on the relationship of dividends relative to the index price movement.