Three Dow 30 Stocks to Buy Now
By: Ned Piplovic,
While the composition of the Dow 30 stocks changes occasionally, this group of stocks has been used as a high-level indication of the overall movement of the market ever since Charles Dow introduced his first stock average index in 1884.
Some market analysts and financial experts insist that the Dow 30 stocks are not an accurate representation of the overall market. Instead, these experts favor the S&P 500 Index — which includes all of the Dow 30 stocks. Regardless of whether the index represents the market accurately, most investors, novices and occasional observers look to the Dow 30 stocks each day as the first indication of how the overall market performed.
The large and established companies contained within the Dow 30 stocks index are highly unlikely to grow their share price five-fold or 10-fold in the next year or two. However, most of these companies could offer long-term capital gains for investors who favor the buy-and-hold investment strategy. Additionally, the fact that every one of the Dow 30 stocks pays a dividend distribution to its shareholders makes them attractive to income investors.
Even investors who are looking for higher growth rates and faster returns should consider using a few of these relatively steady stocks to anchor their investment portfolio. With a strong portfolio base that includes a few of the Dow 30 stocks and other equities with robust fundamentals, investors can then use a portion of their portfolio to seek higher returns elsewhere, albeit at an increased risk.
While almost any three of the Dow 30 stocks can be good picks for long-term returns, the focus here will be on the three stocks in the group that might offer above-average returns in the near term as well.
3 Dow 30 Stocks to Buy Now: #3
Exxon Mobil Corporation (NYSE:XOM)
Dividend Yield: 7.1%
Exxon Mobil has had a strong start to 2021 with YTD (year-to-date) returns of 19.6% in capital appreciation. Its momentous growth is a well-appreciated contrast to the meager returns of the trailing 12 months, where in the last year the stock fell 22.4% due largely to a continual plummet during January, February and March of 2020. While this economic struggle might worry some shareholders, Exxon Mobil made a show of stability by still increasing its annual dividend payout for 2020, with its $3.48 distribution 1.5% higher than it was in 2019. The company’s dividend yield has shown consistently strong growth in the long term as well, averaging a dividend increase of 7.1% per year, every year for the trailing ten years.
Exxon Mobil has also increased its dividend for 38 consecutive years, making it a member of the Dividend Aristocrats — a prestigious group of 65 companies that have increased their dividend every year for the last 25 years or more.
Although the company was negatively affected by COVID-19, it has largely recovered from its share-price pullbacks. On March 11, 2020 — the day COVID-19 received pandemic status under WHO officials — the stock was trading at $41.98. It has since grown 17.2% and its now trading at $49.20.
Exxon Mobil currently has a “hold” consensus among the 28 analysts that cover the stock. 8 analysts are recommending “buy”, 4 are saying “sell” and the remaining 16 maintain a “hold” status. This is unsurprising in that while the company has lost some capital in the last year, it still ranks in the 88th percentile for financial strength, with bragging rights to a high interest coverage ratio and reliable operating cash flow and net income.
3 Dow 30 Stocks to Buy Now: #2
Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Dividend Yield: 4%
Shares of Walgreens Boots Alliance are down 8.9% in the trailing 12 months. Despite this drop in price, the company has continued to both pay and increase its dividend and a regular and even increasing rate. In fact, it is one of the most reliable dividend payers on the market — Walgreens has paid a dividend for 352 consecutive quarters (88 years) and hiked its dividend for the last 45 consecutive years. These numbers mean the company may soon be joining the Dividend Kings — a group of companies more exclusive still than the dividend aristocrats, requiring companies to have increased their dividend for over 50 consecutive years. Only 29 companies qualify for this distinction.
Walgreen Boots Alliance is ranked third in strongest dividend payers among every company in the healthcare providers and services industry group. Its current payout of $0.47 per quarter is equivalent to a $1.87 annual distribution and yields 4%. This is a 3.3% increase from last year’s annual payout, marking slower growth than the 10-year average of 10.3% dividend yield growth per year.
Additionally, Walgreens recently had a highly successful earnings report on January 7, 2021. The company reported adjusted earnings of $1.22 per share on revenue, over 14% higher than analysts’ expectations of $1.03 per share. This correlated to a 6% total growth in revenue year over year. This combined with the company’s recent (July 2020) announcement that it would open 500-700 new doctors offices in the United States by 2025 shows a long-term focus on growth and expansion that make for an excellent value stock for income investors.
3 Dow 30 Stocks to Buy Now: #1
Pfizer, Inc. (NYSE:PFE)
Dividend Yield: 4.3%
Pfizer’s shares are down 1.6% in the trailing 12 months, marking a slight dip that was the product of an unusually volatile year. Shares of PFE plummeted in February and June of 2020 by 10.26% and 14.38%, respectively, but regained this losses with sharp spikes of 17.52% growth in April, 18.89% growth in July, and 15.22% growth in November 2020. This slight dip may be an excellent buying opportunity for investors to purchase the now-fastest vaccine developer in the country.
The sales of this vaccine may prove to be a significant driver of profit in 2021. This profit increase is likely to be limited by two variables: profit sharing and competition. For the first, Pfizer will have to share all profit it makes on its COVID-19 vaccine with the company it partnered with for the development, BioNTech (NASDAQ:BNTX). Second, these vaccine sales will be forces to compete with a similar vaccine from rival company Moderna (NASDAQ:MRNA). Despite these possible obstacles, analysts are optimistic about sales growth in 2021, with projected EPS growth of 8.8% and expected sales growth of 10.5%.
Additionally, Pfizer pays a reliable dividend. The company has grown its dividend every year for the last 10 years, during which it has averaged a growth in dividend yield of 7.8% per year. The company’s current yield is 4.3% with a $0.39 quarterly payout and $1.56 annual distribution.
It is likely that the company is undervalued, and may climb as much as 16% in the near future to better reflect analyst valuations.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.