5 Fascinating Facts About the Dow Jones Industrial Average

Who'd have thought that 30 companies could be so important?

May 14, 2014 at 12:11PM

The Dow Jones Industrial Average (DJINDICES:^DJI) is America's most-watched index. It's also one of the oldest stock market indices in the world. Since its creation, the Dow has attempted to track the American industrial economy, and that has meant many changes as the economy itself has changed. You might be surprised to find out just how much history there is in the Dow, especially when you dig down to study the 30 venerable companies on its roster. Let's look at some of the interesting facts and fun figures about the Dow's composition, and its components.

Dow

The Dow Jones ticker in Times Square.
Source: Wikimedia Commons. 

1. More than 120 companies have been Dow components
The Dow Jones Industrial Average has made nearly 50 changes to its membership since Charles Dow first established the index in 1896. Over the years, these components have ranged from commodity trusts to modern megabanks, and the Dow has swapped out so many stocks that roughly 120 companies -- give or take a handful that appear under multiple names -- can claim to have been blue-chip components at one time or another. Four companies' preferred shares have been part of the Dow as well (the last preferred share was removed when the index grew to 20 components in 1916), and two companies -- U.S. Steel (NYSE: X) and U.S. Leather -- were once considered so important to the American industrial economy that both their common and preferred shares were part of the Dow at the same time!

2. The Dow's oldest component has been on the index for over 100 years
General Electric (NYSE:GE) has been part of the Dow since 1907, which is the longest tenure of any member company. The Dow only tracked 12 components at the time, and this wasn't even GE's first run on the index, since it had actually been one of the first 12 components when the Dow was first developed in 1896.

GE got the boot a mere two years later in favor of U.S. Rubber, but it rejoined in 1899 for another two years before dropping off again in 1901. Its second replacement was a bit more memorable -- U.S. Steel became a Dow component in 1901, shortly after it was created in what was at the time the largest merger in business history. U.S. Steel was also directly responsible for GE's third and final addition to the Dow in 1907, as it bought out fellow Dow component Tennessee Coal, Iron and Railroad at fire-sale prices to help stem the Panic of 1907.

3. The Dow's oldest component isn't its oldest company
GE was created in 1892, but the oldest company on the Dow is nearly a century older. DuPont (NYSE:DD) was founded as "E.I. du Pont de Nemours" by Parisian chemist Eluthere Irenee du Pont de Nemours on the banks of Delaware's Brandywine River in 1802. DuPont quickly became one of the young nation's leading gunpowder suppliers, and its dominance of this early defense-contracting industry led to antitrust efforts a century later.

DuPont, like GE, became a Dow component more than once. Its first tenure on the index lasted only one year, from 1924 until 1925. Its second chance on the Dow has been more durable, as DuPont has been an index component without interruption since 1935.

DuPont might be the oldest company on the Dow, but it doesn't have the deepest roots. Merck (NYSE: MRK) traces its origin to Germany, where Friedrich Jacob Merck established a pharmacy business under the family name in 1668. The original German Merck, like its American offshoot, is now a multibillion-dollar international pharmaceutical company, but it's only a fraction of our Dow component's size.

Oldandnew

Source: David Schult, Fonality.

4. The Dow's youngest company is only 30 years old
Make that 29 -- Cisco (NASDAQ:CSCO) was founded in December 1984, so it won't officially turn 30 until the end of this year. Cisco's rise has been one of the most rapid in history, and not just among Dow components. The company passed $1 billion in market cap less than two years after it went public in 1990, and within a decade of its IPO Cisco briefly became the most valuable company in the world.

Cisco is the last Dow component to be added from the tech world (so far), and it's currently the only Dow component to directly represent the rise of the Internet, as its routers and switches help direct much of the world's online traffic.

5. The average Dow component is 111 years old!
The Dow's 30 components are, on average, much older than their S&P 500 counterparts, thanks to long corporate histories that can easily be traced back through more than a century. The average age of an S&P 500 company has plummeted from 75 years in the 1930s to just 15 years today, thanks to a flurry of rapid growth made possible by new technologies.

Many "modern" Dow components that claim founding dates in the past 30 years are in fact much older. Both ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) trace their origins to John D. Rockefeller's Standard Oil, which was founded in 1870, while AT&T (NYSE: T) and Verizon (NYSE: VZ) are the largest divested parts of the original American Telephone and Telegraph Co. which was created by telephone pioneer Alexander Graham Bell's American Bell in 1885. The financial sector is the oldest in the Dow, as the average age of its six representatives is 130 years, and this average is skewed by UnitedHealth's (NYSE: UNH) 1977 founding -- JPMorgan Chase (NYSE:JPM), for example, traces its lineage to the end of the 18th century, as the Chase half of this megabank merged with the Bank of Manhattan, which was established by Aaron Burr in 1799.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool recommends Chevron, Cisco Systems, and UnitedHealth Group. The Motley Fool owns shares of General Electric Company and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers