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All Contents © 2018The Kiplinger Washington Editors
By Aaron Levitt
| September 22, 2017
You can make the argument that the Dow Jones Industrial Average isn’t necessarily the best representation of the entire U.S. economy anymore. That title goes to the S&P 500 Index. But you can’t deny that the 30 Dow Jones stocks are kingpins in their respective industries. After all, the stocks in the Dow Jones are some of the crème de la crème of tech, manufacturing and finance stocks.
There’s a reason why nearly $18 billion still sits in the SPDR Dow Jones Industrial Average ETF (DIA), and that’s because the index remains a pretty good collection of blue-chip stocks.
But not all thirty Dow Jones stocks are big buys today. In fact, it makes sense to avoid a few of them. With that, how does an investor know exactly which of these stocks belong in your portfolio? Luckily, we’ve done the leg work for you.
Here are seven of the best Dow Jones stocks to own today.
Prices and data are from the original InvestorPlace story published on September 19, 2017. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Wal-Mart Stores Inc. (WMT) needs no introduction. We all know about the world’s largest retailer and its massive global store footprint, wide moat and continued earnings power.
There’s a reason why it’s included among the thirty Dow Jones stocks. It really has no rivals, except for maybe Amazon.com, Inc. (AMZN).
And WMT has recently begun giving notice to Bezos & Company that it's not going anywhere.
Walmart has gone gangbusters into e-commerce to fend off online shopping. This has included buying Jet.com and a whole host of smaller shopping sites, adding additional online shipping/pickup options and beefing up the number SKUs on Walmart.com. And those efforts seem to be working.
Last quarter, WMT managed to post a 60% gain in e-commerce revenues with 60% total unit sales in online operations higher by 67%. What was really surprising was this was the second quarter of 60%+ annualized revenue gains for online sales at Walmart. Even better is that the firm reported an increase in store foot traffic and higher sales because of its online store pick-up option.
With online sales finally starting to move in the right direction, WMT is once again moving to the top of the retail throne — where it should be.
As for Walmart stock, it’s one of the best Dow Jones stocks that should be in your portfolio.
When you hear the name Cisco Systems, Inc. (CSCO), images of the dot-com boom-and-bust come to mind.
That’s understandable — Cisco was one of the internet’s rising stars back in the late 90s. But CSCO is no tech dinosaur. The firm is as vibrant as ever and it continues to be one of the best tech companies among the Dow Jones stocks, especially if you’re looking for a hefty dividend payout.
Tucked behind — well, really in front — of its network equipment business is CSCO’s focus on services and the continued high-margin revenues it generates. These forays include adding cyber security, big data, “Internet of Things” connectivity, automated vehicles and even renewable energy solutions. This focus has made Cisco a great play on many of the hottest trends in technology period.
It has also made CSCO a cash flow and dividend machine.
Cisco has more-than-quadrupled its dividend over the last years and it currently generates about $12.9 billion in free cash flows. Today, the former dot-com darling’s cash hoard has grown to more than $70 billion. And with a certain Commander-in-Chief looking at a repatriation tax holiday, CSCO could bring more of that home to its investors for dividends and buybacks.
For investors, Cisco’s current yield of 3.58% and the potential for it to grow further makes it a great grab when looking at the thirty Dow Jones stocks.
Speaking of cash piles, Apple Inc.’s (AAPL) is a staggering $260 billion plus. That alone is enough to warrant buying the stock. After all, AAPL has been very generous in handing that pile back to investors.
But what is truly impressive is that Apple still has plenty of ways to keep that pile growing into the future.
For one thing, its recent Apple event had plenty of product launches that will help it stream the cash into its coffers. That includes the breathtaking iPhone X at $999 a pop, a new Apple Watch that doesn’t have to be tethered to an iPhone and its new Apple TV that supports 4K movies and video.
And then there are its services businesses to consider. AAPL continues to rake in the cash from the sale of digital audio, video and apps for the iPad and iPhone. These sales — along with streaming music — have become a more significant piece of the revenue pie for the firm. Moreover, they are a higher margined piece of the pie. With that, Apple continues to see the pace of its free cash flows expand.
The real beauty is that AAPL will need to do something with all that cash. And given the company’s history of dividend increases, odds are it’ll come back to its investors.
WillidaUTC via Wikipedia
A few years ago, United Technologies Corporation (UTX) was said to be an acquisition target itself. But today, the Dow Jones stock is doing the buying. Thanks to its mega-sized plans to buy aircraft parts maker Rockwell Collins, Inc. (COL) for $23 billion.
Already an aerospace giant, the addition of COL to UTX’s stable of businesses would create one of the largest airplane parts manufacturers in the world. Even better is that the two firm’s aerospace divisions complement each other perfectly and it would allow United Technologies to expand into the so-called smart and connected aerospace market.
Now, on paper the deal is great. However, analysts are raising questions as to whether it’s the right price. And rival Boeing Co (BA) has threatened to raise concerns about the deal. BA gets parts from both companies and fears that its prices will go up.
As a result, shares of UTX have tanked in the wake of the announcement.
But that might just be the inroads into United Technology shares. While the deal seems expensive, you are looking at a rising defense budget, and that will help the economics of the deal as the U.S. government orders more planes and aircraft. Meanwhile, the real heart of the deal is higher-margined software. So after cost cutting, the company should be able to squeeze out more from the buy.
With this, UTX stock’s recent 7% decline could be a great chance to snag shares for the long-term picture on the deal.
Unrestricted greed does make you a lot of money. And when it comes to Dow Jones stocks, no one does that better than Goldman Sachs Group Inc. (GS).
The investment bank has its hands in a variety of soups while trying to do “god’s work.” And “god’s work” could net it an extra $5 billion revenue and an extra $2.5 billion to its pre-tax profit over the next three years.
All by returning to its banking roots.
While stock, currency and derivatives trading made up the bulk of GS’s revenues in recent years, regulation and low interest rates have limited the effect of these businesses. Its fixed income trading division has produced poor results and shareholders are getting restless. That has Goldman plowing head-first back into traditional banking by beefing up lending and investment management
Its Marcus loan product is proven to be a hit with consumers and Goldman has committed more than $28 billion to new lending activity. Meanwhile, it has taken on new investment management roles in exchange-traded funds and other products. The firm has also refocused itself back to corporate pensions and endowments for trading accounts and management.
This return to old school banking should help Goldman overcome the continued slide in its own prop-trading desks that still haven’t recovered from regulations.
With that, GS could be one of the best Dow Jones stocks to own.
Oil goes up. Oil goes down. And so goes Chevron Corporation (CVX). CVX continues to be one of energy majors most tied to oil production.
However, that relationship between Chevron stock and oil prices may not be entirely true. Yes, the company will make more money when oil is high (and it has been rising again, hurricanes aside), but the downturn has allowed it to refocus and live more within its means.
The firm went on a huge cost cutting program, slashed capital expenditures, sold junk assets and re-positioned itself to work through the “lower for longer” environment. Break-even costs for the producer now sit around $50 per barrel. And at that level, CVX will be cash flow positive for the first time in several years.
For investors, especially those attracted to CVX’s hefty 3.84% yield, this is great news. Investors today, really are getting a much stronger oil play than they had even when prices for crude were in the triple digits.
One of the biggest appeals of the Dow Jones stocks is that they are a port in the storm. With North Korea, political infighting and a whole host of other issues making themselves known, the Dow Jones stocks could become a portfolio’s best friend.
And 3M Co. (MMM) could be your “BFF.”
The firm’s product catalog of more than 19,000 different items spans everything from Post-It notes and tape to diamond-plated grinding discs and lubricants. Even better is that MMM sells those products across the globe. That has helped 3M navigate the challenging economic environments before and it will in the future.
Want further proof? Take a look at MMM’s dividend history. The firm has been paying a dividend since 1916 and it has increased the annual dividend for 58 consecutive years. That means its dividend has survived a lot of recessions, the Great Depression and the credit crisis/Great Recession.
For investors looking for the ultimate defense, 3M could be one of the better choices among the Dow Jones stocks.
This article is from Aaron Levitt of InvestorPlace. As of this writing, he held none of the aforementioned securities.
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