For many years, the Dow Jones industrial average ruled the investing world, before the advent of electronic and computer-driven trading. Created in 1896 by Charles Dow, the index originally consisted of 12 companies, each considered a giant in its sector. The Dow was introduced early in The Wall Street Journal as the first index of stock market activity. While the companies in the venerable index have changed many times since 1912, it is still considered one of the elite indexes in the world of investing.
The Dow has been overshadowed this year by the spectacular rise in the Nasdaq, which is up 27% as of the close Monday due to the artificial intelligence explosion and the rise of the Magnificent 7. The Dow has risen a paltry 1.1% in that time. Note that Microsoft is a Dow stock and is one of the Magnificent 7.
One reason for the severe underperformance is that many of the top companies among the 30 members of the Dow have had dreadful years for a variety of reasons. We decided to screen these casualties while looking for value. In addition, we looked for companies that have paid dividends for years and will likely continue to do so.
Five industry leaders made the cut. While not all are at 52-week lows, they all have underperformed and are offering patient investors some big-time upside potential, and they will pay some dependable, and in some cases quite large, dividends while investors wait for a rebound. While all five are rated Buy at top Wall Street firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Goldman Sachs
This industry leader is a premier stock in its sector, for those looking to add financials at a very reasonable price and multiple. Goldman Sachs Group Inc. (NYSE: GS | GS Price Prediction) has a gigantic institutional equity, debt and derivatives business, an ultra-high net worth clientele, and top investment banking and capital markets expertise, and it continues to be a dominant force around the world in the world of finance.
Its Investment Banking segment provides financial advisory services, including strategic advisory assignments related to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs. It offers middle-market lending, relationship lending and acquisition financing, as well as transaction banking services.
This segment also offers underwriting services, such as equity underwriting for common and preferred stock and convertible and exchangeable securities, as well as debt underwriting for various types of debt instruments, including investment-grade and high-yield debt, bank and bridge loans and emerging- and growth-market debt.
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The Global Markets segment is involved in client execution activities for cash and derivative instruments, credit products, mortgages, currencies, commodities, and equities, as well as provision of equity intermediation and equity financing services. It also offers clearing, settlement and custody services.
Shareholders receive a solid 3.40% dividend. Oppenheimer has a $450 target price on Goldman Sachs stock. The consensus target is just $361.65, and the stock closed on Monday at $318.50 a share.
Intel
This legacy leader in semiconductors has been hammered, and while some feel it is a value trap, it is hard to count out the company that defined the semiconductor revolution. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide.
The platforms are used in various computing applications, comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
Intel announced over a year ago that it would invest significantly to build potentially the world’s largest chip-making complex in Ohio, looking to boost capacity as a global shortage of semiconductors affects everything from smartphones to automobiles. Intel says the 1,000-acre “mega-site” northeast of Columbus has room for as many as eight plants, known as “fabs.” The company estimates it would require a $100-billion investment to fully build and equip those plants.
Investors receive a 1.41% dividend. Needham’s price target is $40, and Intel stock has a consensus target of $33.12. Monday’s closing price was $35.46 per share.
Nike
The athletic shoe and apparel giant just dropped some big results, and while the stock rallied sharply Friday, it still trades way below the 52-week high. Nike Inc. (NYSE: NKE) designs, develops, markets and sells athletic footwear, apparel, equipment and accessories worldwide under the Jumpman, Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks.
In addition, Nike sells a line of performance equipment and accessories, comprising bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment and other equipment for sports activities under the Nike brand, as well as various plastic products to other manufacturers.
The company markets apparel with licensed college and professional team and league logos, as well as sells sports apparel. Additionally, it licenses unaffiliated parties to manufacture and sell apparel, digital devices and applications and other equipment for sports activities under Nike-owned trademarks.
The company sells its products to footwear stores; sporting goods stores; athletic specialty stores; department stores; skate, tennis and golf shops; and other retail accounts through Nike-owned retail stores, digital platforms, independent distributors, licensees and sales representatives.
Nike stock comes with a 1.42% dividend. The $136 J.P. Morgan target price is a Wall Street high. The consensus target is $114.38 for now, and shares closed on Monday at $94.56.
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Verizon
This top telecommunications stock offers tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.
Verizon’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. The company’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.
The company also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
The dividend yield here is 8.38%. Morgan Stanley has set its price objective at $44, well above the $37.60 consensus target. Verizon Communications stock closed on Monday at $31.76.
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Walgreens
This huge drugstore chain operator is a safe retail play for investors looking to add health care now, and it trades at a cheap 7.5 times 2023 earnings expectations. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.
The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.
The Retail Pharmacy International segment sells prescription drugs and health and wellness, beauty, personal care and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as online and an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada in the United Kingdom, Thailand, Norway, the Netherlands, Mexico and elsewhere, and 550 optical practices, including 165 on a franchise basis.
The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.
Shareholders receive a 9.19% dividend. Walgreens Boots Alliance stock has a $41 target price at Cowen. The $28.41 consensus target is closer to Monday’s closing print of $22.42.
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These five top Dow stocks have lagged this year and are offering investors some of the best entry points in years, in some cases. While all are working through some daunting issues, it is a strong bet that all will not only survive but thrive in the years to come. For growth stock investors with a long-term timeline, these companies make a ton of sense.
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