The Motley Fool Previous Page

Dow Plunges: How Did McDonald's, AT&T, and Coca-Cola Hold Firm?

Dan Caplinger
April 10, 2014

Thursday was a nightmarish day for the Dow Jones Industrial AverageĀ (DJINDICES: ^DJI), which plunged 266 points to post its worst decline since early February and reversing the gains it had earned earlier in the week. But even though the Dow tumbled, McDonald's (NYSE: MCD) and AT&T (NYSE: T) actually managed to gain on the day. Moreover, although Coca-Cola (NYSE: KO) wasn't quite as lucky as those Dow components, its losses were relatively minimal. How did these three stocks escape Thursday's carnage, and will they continue to outperform the Dow Jones Industrials going forward?

Looking for reliability
One of the most obvious characteristics that all three of these members of the Dow Jones Industrials possess is that they're all solid dividend stocks. Coca-Cola and McDonald's have dividend yields higher than 3%, while AT&T carries the Dow's highest dividend yield, at more than 5%. When the stock market starts to perform badly, many investors fall back on dividend-paying stocks, especially those that have reliable track records of increasing their payouts even during bad market conditions. Coca-Cola tops that list with a 52-year streak of consecutive annual dividend increases, but McDonald's 38-year string of rising dividends and AT&T's 30-year streak also qualify for the prestige of being Dividend Aristocrats -- an exclusive list of just a few dozen companies that have made annual dividend boosts for at least a quarter-century.

Source: McDonald's.

In addition, those who remember the bear market of 2008 know that some stocks contributed more to the Dow's plunge that year than others. Remarkably, McDonald's managed to gain almost 9% that year, and while AT&T and Coca-Cola did have dramatic losses in the 25% to 30% range, they were still markedly better than the Dow's 34% decline.

Admittedly, these three Dow stocks have all gone through som