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Monday, 03/03/2003

You've heard of March Madness! Now its time to get Dividend Maddess! - The Dow's Best to it's Badest!
by Steve Gail

Just about this time every year, the sports world hears the retort of March Madness, the NCAA basketball championship tournament. In taking a page from this collegian spring extravaganza, I thought it might not be a bad idea to size up the Dow Jones Industrial DRIP programs to kick off this month's articles of the DRIP Advisor.

Rumor has it, that the Dow Jones industrial averages started out with only 12 issues back in 1896, since then there have been numerous additions and subtractions made before we finally arrived at what is commonly known as today as "The Dow Jones Industrial Averages." In examining these 30 companies I would like to refer back to an earlier article on the Drip advisor that mentioned one of the basic criteria that an investor should seriously consider before making an DRIP plan decision. In case anyone forgot, it was to try and use companies that offer BOTH the Dividend Reinvestment Program along with an Optional cash program along with the ability to automatically reinvest both the dividends and the option cash into more shares. One again, the reason is to maximum accumulation of shares. So the first thing that we are going to look at is how the Dow 30 stacks up against each other in terms of Dividend Investment Programs and Options Cash programs that may or may not be offered to the public. Let's take a look at Exhibit A below, this list will show you which Dow Jones Industrials offer Dividend Reinvestment plans and direct investment plans ( option cash investment) as well as the few Dow Industrials who currently do not.

EXHIBIT A:

As you can see from above, 14 of the Dow 30 Industrials offer BOTH a Dividend Reinvestment Program and an optional cash program.

In addition, the next 12 on you list offer a DRIP program, but do not have currently an optional cash program.

Finally, you will notice that there are 4 Dow Industrials that currently offer NO Dividend Reinvestment Program at all.

Eventhough, only 14 of the Dow Industrials give us the optimum scenario to work from, we still have some excellent choices from which we can select. Let's take a further look to see what these Dow issues pay out in dividends, both from a yield and from a dollar per share basis. Let's take a look below at Exhibit B and compare all of the industrials.

Exhibit B: [ year end reports 12-31-2002 ]

Please notice that the two highest yielding dividend companies (based on current yield) Phillip Morris and General Motors, do not have a direct investment program or optional cash program. In addition, Eastman Kodak's (#3) does not have nearly the good financial rating as #1 and #2. In addition, Microsoft and JP Morgan DO NOT CURRENTLY PAY ANY DIVIDENDS.

Just to give you a bigger picture, the DOW industrials would have given you the following total returns had you invested in these stocks over the last ten (10) years. (See EXHIBIT C)

EXHIBIT C : [ source Morningstar ]

If you examine the list you will find Big Blue yielding the greatest return over the last 10-year period. However, Citigroup (which pays dividends, but has no DRIP or Direct Investment Program )and Microsoft (which pays No dividend) are not considered on the top of the list because they do not offer a DRIP program.

I hope this little insight in the Dow will give you some food for thought.

Until next time,

 
 

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