On May 26, 2026, the iconic Dow Jones Industrial Average (^DJI 0.58%) will celebrate its 130th anniversary since its official inception.
When it was initially formed, the Dow was an index dominated by one dozen industrial stocks. But over the last century and change, it's evolved into an encompassing index composed of 30 diverse, multinational, and time-tested companies.
But these components aren't static. Since the Dow Jones Industrial Average is a share price-weighted index, companies that underperform over long periods, or those that lose relevancy, either within the index or U.S. economy, are eventually removed and replaced.
Image source: Getty Images.
The index has undergone nearly five dozen changes since 1896, a couple of which are recognized as nothing more than official company name changes or a public company merging with an existing Dow component. Most of these adjustments involve laggards being booted from the Dow in favor of companies with better long-term growth prospects that are more representative of the U.S. economy.
In 2026, I believe we'll witness the 60th change in the Dow Jones Industrial Average in 130 years, with telecom titan Verizon Communications (VZ +0.10%) getting the unceremonious heave-ho and a trillion-dollar juggernaut replacing it.
Prediction: Verizon gets booted from the Dow in the new year
Verizon first entered the ageless Dow Jones Industrial Average in April 2004, replacing its primary rival, AT&T. The proliferation of wireless cellular service, coupled with cellphones becoming something of a basic necessity that consumers and businesses were unwilling to live without, offered a compelling long-term growth story.
But several issues strongly suggest Verizon is a candidate to be shown the door in 2026.
NYSE: VZ
Key Data Points
To begin with, Verizon stock ended the Jan. 21 trading session at just $39.24 per share. Whereas the S&P 500 and Nasdaq Composite are market-cap-weighted indexes, Dow points are determined entirely by share price and the Dow divisor. In other words, the higher a company's nominal share price, the more influence it has within the Dow.
Only four Dow components have a share price below $111, with Verizon's nominal share price notably lower than the next-closest Dow-30 stock, Nike, whose shares closed at $65.41 on Jan. 21. Verizon only accounts for roughly 241 out of the Dow's 49,077 points.
Another strike against Verizon is that its shares have gone virtually nowhere, excluding dividend payments, since its inclusion in the index on April 8, 2004. Based on data from YCharts, Verizon shares have gained just 17% in almost 22 years.
The third and final knock against Verizon is its long-term growth potential. Although it has an ultra-high yield of 7% and generates predictable operating cash flow with a relatively low wireless churn rate, there's little hope of an annualized growth rate higher than the low-to-mid single digits, given already high domestic wireless and broadband saturation. It's a stalwart communications company that isn't necessarily representative of today's economy.
Image source: Getty Images.
Out with the old and in with the new
Keeping in mind that S&P Dow Jones Indices -- the entity responsible for making adjustments to Wall Street's iconic index -- would want a replacement with a three-digit nominal share price that's a key player in one or more aspects of the U.S./global economy, the most logical replacement for Verizon in the Dow is Google parent and trillion-dollar club member, Alphabet (GOOGL 0.73%)(GOOG 0.73%).
Mind you, several candidates would make sense. T-Mobile would represent a lateral shift that offers a faster long-term growth rate when compared to Verizon. Meanwhile, social media titan Meta Platforms would bring significant exposure to the advertising industry into the Dow. However, Meta's $600-plus share price may be too extreme on the high end for inclusion (Meta has never split its stock), and T-Mobile's operating model may be too similar to Verizon's. It could be in the same boat as Verizon a decade from now.
Alphabet strikes the perfect balance between tech and communications.
On the one hand, Alphabet generated 72.5% of its net sales during the September-ended quarter from advertising. This includes its Google search engine, which accounts for a virtual monopoly in global internet search share, as well as YouTube, the second-most visited social site on the planet. Since advertising is cyclical, Alphabet would serve as a valuable barometer of advertising health for the Dow Jones Industrial Average.
NASDAQ: GOOGL
Key Data Points
However, Alphabet is also a cloud-computing and artificial intelligence (AI) pioneer. Its cloud infrastructure service platform, Google Cloud, ranks third worldwide in total cloud infrastructure service spend. This high-margin operating segment is incorporating generative AI solutions that are further accelerating its 30%-plus sales growth rate.
In addition to Alphabet's two-pronged growth approach, the company's share price performance is likely to speak to (if not scream at) S&P Dow Jones Indices. Since its initial public offering in August 2004, Alphabet's shares have increased at a compound annual rate of more than 25%. This is the type of measurable growth that can lift the Dow above and beyond 50,000.
Furthermore, Alphabet conducted a historic 20-for-1 forward stock split in July 2022. This split reduced its share price from around $2,200 to approximately $110. Before its split, Alphabet had no chance of joining the Dow, as its ultra-high share price would have dominated the index. With its shares now hovering around $330, it would slot in at the ninth-most influential company in the Dow Jones Industrial Average.
Among Wall Street's five most valuable public companies, Alphabet is the only one that's currently not part of the Dow. It's my belief this is going to change before 2026 comes to a close.
