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Decades of Great Performance From 9 Dow Stocks

By Robert Eberhard – Updated Apr 6, 2017 at 5:53PM

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A Fool examines 20-year (or more) members of the Dow Jones Industrial Average.

The Dow Jones Industrial Average (INDEX: ^DJI) started out by tracking the leading U.S. industrial companies of the late 19th century. It has widened its scope beyond traditional heavy industries, but it still tracks the movement of 30 large companies during daily trading sessions. A scaled average of these companies is reported throughout the trading day and, like the S&P 500, is used to track the general health of the stock market, if not the entire U.S. economy.

I've recently explored both the oldest and newest companies to grace the Dow's esteemed rolls. We can break the middle children of the Dow into two distinct classes: those that have been on the average for at least 20 years, and those that have all been added in the past 15 years.



Date Added to the DJIA

Dividend Yield

CAGR Since Addition

IBM (NYSE: IBM) Computers and technology June 29, 1979* 1.6% 10.2%
Merck (NYSE: MRK) Pharmaceuticals June 29, 1979 4.4% 12.8%
American Express (NYSE: AXP) Consumer finance Aug. 30, 1982 1.4% 12.8%
McDonald's (NYSE: MCD) Fast food Oct. 30, 1985 3% 14.8%
Coca-Cola (NYSE: KO) Beverages March 12, 1987* 2.8% 12.6%
Boeing (NYSE: BA) Aerospace and defense March 12, 1987 2.6% 9.4%
Walt Disney (NYSE: DIS) Broadcasting and entertainment May 6, 1991 1.2% 7.1%
Caterpillar (NYSE: CAT) Construction and mining equipment May 6, 1991 2% 16.8%
JPMorgan Chase (NYSE: JPM) Banking May 6, 1991 3% 11.8%

Sources:,, Yahoo! Finance.
*Reflects date of most recent addition.

Big Blue and some drugs, too
IBM returned to the Dow after being dropped in 1939 in favor of AT&T. Maybe giving IBM the boot was a mistake on the part of the Dow Jones folks, considering that the company's shares grew 22,000% in the interceding 40 years. Unfortunately, the re-addition happened before to one of the slowest growth periods in the history of IBM's stock. It has recovered nicely in the past decade, though, returning roughly 92% to shareholders during that time. As its longer name indicates, International Business Machines can also be a great international investment for your portfolio.

Merck traces its origins to a drugstore opened in 1668 in Darmstadt, Germany. After setting up U.S. operations in 1891 in New York, it remained a German company until its assets were seized in 1917 during World War I. A merger with Schering-Plough in 2009 created the second-largest health care company in the world by market share. It currently pays the third-highest dividend on the Dow but has recently entered into a patent fight with leading competitor Pfizer.

Don't leave home without it
American Express secured its place on the Dow when manufacturer Johns-Manville declared bankruptcy in 1982 as a result of asbestos litigation. American Express was the first financial company added to the index, and it was the only one until joined by J.P. Morgan in 1991. Known for its charge cards, American Express lags behind behemoths Visa and MasterCard. But recent quarterly results from the iconic company beat expectations, even in trying economic times. Although it does have one of the lower dividend payouts of the Dow companies, it has long been admired by Warren Buffett; Berkshire Hathaway has a position in American Express of roughly $7.8 billion in its investment portfolio.

Billions and billions served
McDonald's went public in 1965 and was added to the Dow 20 years later. It is truly a global brand, with more than 32,000 restaurants in 117 countries as of its 2010 annual report. Though started in the U.S., McDonald's now derives roughly two-thirds of its annual revenue outside the United States. It has the second-highest stock return of the stocks on this list since its addition to the index, and it could very well be one stock for the rest of your life. Throw in the fact that it's one of the S&P's "dividend aristocrats" and has continued to grow its dividend despite a recession, and you have a great option for your portfolio going forward.

A return and an arrival
Coca-Cola returned to the Dow list in 1987 after having been in the average from May 1932 to November 1935. The reason for its removal has been lost to history, but since its return, it has become the dominant beverage maker in the world. Thirsty patrons in more than 200 countries collectively consume 1.6 billion of Coca-Cola's drinks per day. It's an outstanding dividend stock as well, having raised its dividend payout each year for the last 49 years.

Also added in 1987 was Boeing. Since Dow Jones doesn't really state why a company is placed on the index, it's hard to know exactly why Boeing was added, other than the fact that it's a leading defense and aerospace contractor. Recently, it announced that it's finally delivering its long-promised 787 Dreamliner to a North American airline. It may not be the perfect stock, but its inclusion on the Dow for nearly 25 years indicates that it's held above others in its industry.

It's been 20 years
The final three companies on our list here were all added to the Dow on the same day and have now been on the index for just over 20 years. Disney replaced former Dow stalwart U.S. Steel, yet another move away from the "industrial" history of the average and marking America's transformation from manufacturing to a service economy. Since it was added in 1991, Disney expanded beyond its amusement parks and movies with the acquisition of ABC and ESPN, becoming a true broadcasting powerhouse. Its acquisition of Marvel gave it ownership of some of the most anticipated movies of the next couple of summers. The stock, however, is the poorest performer of this group and also has the lowest dividend.

Caterpillar, on the other hand, has shown the most success since its addition to the Dow, returning an annualized 16.8% over the past 20 years! Manufacturing heavy equipment is truly industrial, giving more than enough reason to be included in the average. Growth in Asia also points to a rosy future for this dividend dynamo.

The final company on our list is "too big to fail" bank JPMorgan Chase. Financial stocks have been hit pretty hard over the past few years, and JPMorgan is no exception. However, on the heels of an impressive quarterly report last week, the banking giant may be on its way back to normality. It is joined on the Dow by Bank of America, and of the two, JPMorgan is probably the better bet. It pays a fairly substantial dividend -- especially by "big bank" standards lately -- and has returned nearly 12% annually since being placed on the Dow 20 years ago.

Longevity can be important
The folks at Dow Jones have created an index that looks at 30 important stocks that represent a broad look at the U.S. economy. All nine of these companies have been included for at least 20 years, and all have shown the ability to perform even when the market might be struggling. Because of their potential overseas, I particularly like Caterpillar, McDonald's, and IBM, but all are worth investigating further. For starters, two of these companies have been included in our free report "13 High-Yielding Stocks to Buy Today." Find out which two and get your copy while it's still available.

Fool contributor Robert Eberhard owns no shares of the companies mentioned. Follow him on Twitter, where he goes by @GuruEbby. The Motley Fool owns shares of Berkshire Hathaway, Coca-Cola, JPMorgan Chase, Bank of America, MasterCard, and IBM. Motley Fool newsletter services have recommended buying shares of Visa, Berkshire Hathaway, Walt Disney, Pfizer, Coca-Cola, McDonald's, and AT&T, as well as writing a covered strangle position in American Express. We Fools don't 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.

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