Dow Jones Industrial Average (DJIA) Yield: Meaning, How it Works

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. The DJIA is one of the most widely watched stock market indexes in the financial markets and is considered a bellwether of the U.S. economy. The yield is dividend distributions divided by the index value divided by the Dow Divisor.

Understanding the Dow Jones Industrial Average (DJIA) Yield

The DJIA is no longer a purely industrial index. Rather, the 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 in the index have sustained growth and are of interest to a wide array of investors because of their solid reputations. 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).

The yield fluctuates as dividends increase or decrease 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 fluctuated from just above 1% in late 1999 to above 4% in early 2009. Between January 2010 to early 2021, the yield fluctuated between roughly 1.5% and slightly higher than 3%.

When the index moves down substantially, as it did during and following the 2007-2008 financial crisis, the dividend yield tends to move higher. As stock prices fall, companies may not cut their dividend immediately. Dividend payouts may remain 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 might be performing better, earning more profit, which leads to an increase in 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.

Example of the Dow Jones Industrial Average Yield

The SPDR Dow Jones Industrial Average ETF Trust offers a yield of 1.94% as of July 6, 2023. Assuming no change in the index or dividend payouts, if an investor purchased the DIA at $339.23—the closing price on that day—they would earn 1.94% in dividends in one 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.

The Bottom Line

The Dow Jones Industrial Average is one of the most important stock market indexes in the world. As such, it is considered a gauge of the U.S. economy. One closely watched metric of the Dow is the dividend yield, which is the aggregate yield on the 30 stocks that make up the index. Investors who track the DJIA should understand that this yield changes based on the index's composition along with company weightings and the value of the index.