For the granddaddy of all major market indices, the Dow Jones Industrial Average, it was a very good year. The price-weighted measure of 30 of the biggest, and arguably the most significant, stocks trading in the market today reached a bullish milestone this year, as the Dow breached the 18,000 mark for the first time.
As a group, stocks in the Dow managed to log an impressive 11.5% total return year-to-date through Dec. 26. That’s not too shabby, but it actually pales in comparison to the 15.3% year-to-date total return in the broader measure of the domestic equity market, the S&P 500 Index.
This year, the Dow’s top-tier performers, i.e. the 10 best Dow stocks of 2014, all had outstanding showings, with some very big total returns in the some of the biggest technology companies on the planet.
Insurers in the Dow also saw extremely powerful moves to the upside, as did a home improvement retailer, an entertainment giant, an apparel maker, an industrial products maker, and a credit card issuer.
In other words, the Dow enjoyed a variety of winners in 2014, a testament to the widespread rally in stocks throughout most of the year.
Here are the 10 best Dow stocks of 2014:
Best Dow Stocks for 2014: #10, Visa Inc (V)
Credit card issuer Visa Inc (V) has benefited mightily from consumer buying trends in recent years, including increased online purchases and a continued eschewing of cash as a medium of exchange.
And despite multiple high-profile credit card security breaches at stores such as Target Corporation (TGT), it seems as if there is no reluctance to “charge it” on the part of consumers.
For Visa stock, the past year’s total return happened in conjunction with the expansion of its business operations and technology centers in friendly, low-cost countries such as India. The company also has big plans for increased mobile payments, which could help the shares continue to perform in the year to ahead.
The gain in the stock also coincides with its consistent earnings beats throughout the year, as well as with its shareholder-friendly buyback announcement of some $5 billion. Add to these positives a 20% increase in V stock’s quarterly dividend, and it’s no surprise investors wanted to cozy up to this Dow component in 2014.
Best Dow Stocks for 2014: #9, Travelers Companies Inc (TRV)
Insuring commercial and personal property, and providing casualty insurance to some of the biggest organizations around is what Travelers Companies Inc (TRV) is all about.
Last year, the company expanded its operations into Canada with the acquisition of Toronto-based Dominion of Canada. The move up north helped Travelers build on its already-impressive earnings growth, which was nearly 17% year-over-year in the most-recent quarter.
Despite the strong total return showing in 2014, or perhaps because of it, analysts at UBS downgraded the shares from to “neutral” from “buy” in December. The firm cited valuation metrics for the downgrade; however, UBS also lifted TRV share’s price target to $105 from $101.
Considering that the company is trading at nearly $107, Wall Street doesn’t seem to have put much weight in the “fully valued” UBS thesis.
Best Dow Stocks for 2014: #8, 3M Co (MMM)
When you sell as many different products as industrial giant 3M Co (MMM) does, the opportunities for strong revenue and earnings abound. Perhaps best known for selling everyday office items such as Post-It Notes and Scotch brand tape, 3M Co also was regarded by investors as a strong stock to own in 2014.
3M Co gave back to shareholders in 2014 in the form of a 20% increase in its quarterly dividend. That move was announced in December, along with reaffirmed guidance for revenue and earnings in the year ahead and beyond.
3M officials stated that the company was on track to meet its long-term goals, which included EPS growth of 9%-11% per year from 2013 through 2017. The behemoth industrial firm also said it was on track for organic sales growth of 4%-6% per year on average.
To be certain, those growth goals represent a lot of tape and Post-It notes, but judging by this year’s performance, Wall Street thinks 3M can deliver.
Best Dow Stocks for 2014: #7, Nike Inc (NKE)
There’s nothing more powerful on Wall Street than a trendy fashion wave fueling the top- and bottom-line performance of a stalwart company. That’s what’s happened this year to Nike Inc (NKE) shares, as it enjoyed a boost from the so-called “athleisure” trend.
The trend, which is largely female-driven, combines athletic gear and leisure wear for use both at the gym and for going out on the town. Yoga pants and sweat pants now are a staple of female fashion, as are athletic shoes and hooded sweatshirts, or “hoodies” for men.
This trend has boosted Nike’s earnings in 2014, and in December the company reported yet another quarter of strong double-digit sales and earnings growth. That growth is expected to continue in 2015, and that bodes well for NKE, which outfitted shareholders with a year-to-date return of nearly 24%.
Best Dow Stocks for 2014, #6: Walt Disney Co (DIS)
Entertainment giant Walt Disney Co (DIS) had yet another fantastic year, delivering outstanding top- and bottom-line performance even by its own high standards.
In fact, fiscal 2014 saw Disney log its best year ever, a showing that resulted in a 34% increase in the company’s quarterly dividend, which was announced in early December.
One of the most profitable parts of Disney’s operations is its studio entertainment division, which just seems to hit the mark year after year with hits such as the blockbuster animated film Frozen.
Next year, the company’s Marvel and Lucasfilm divisions will be working overtime, with almost-certain hits such as the upcoming Avengers: Age of Ultron, and the highly anticipated Star Wars: Episode VII — The Force Awakens.
For DIS shareholders in 2014, the force was certainly with you. The stock has a year-to-date total return of more than 25%, which in Dow component performance terms is certainly a blockbuster hit.
Best Dow Stocks for 2014: #5, Home Depot Inc (HD)
If you’ve ever owned a home, then you’ve likely purchased something from Home Depot Inc (HD). The home improvement retailer has been a stalwart earnings performer over the years, particularly over the past couple of years as the U.S. economy slowly but steadily continues to improve.
Of course, there wasn’t much “slow and steady” about the share price performance of HD stock in 2014, as the company helped investors build up a 26.7% total return for the year. That performance helped HD crack the top five in terms of Dow component showings, quite an impressive feat for a stock in the still-struggling housing sector.
Despite some improvement of late, housing is the one segment of the economy that hasn’t seen the kind of gains most Americans have hoped for. Still, HD shares continue to deliver, and if housing and the economy continue to get better, then both consumers and investors will likely continue to go to Home Depot.
Best Dow Stocks for 2014, #4: Microsoft Corporation (MSFT)
It’s been a long time since Microsoft Corporation (MSFT) has been near the top of anyone’s top-performers tally, but this year Mister Softee has delivered a rock-hard total return of 27%, placing it third on this year’s 10 best Dow stocks list.
The software giant’s bullish fortunes in 2014 were due in large part to new CEO Satya Nadella’s now famous “mobile first, cloud first” strategy. This strategy was viewed as a positive enhancement to previous CEO Steve Ballmer’s “devices and services” strategy.
As Ballmer runs the NBA’s Los Angeles Clippers, Nadella continues to run up and down Wall Street’s court, and the result has been the outstanding year-to-date run in MSFT that’s made believers out of both shareholders and skeptical pundits. The question now is can Nadella continue delivering innovation with his “mobile first, cloud first” strategy in 2015?
We’ll soon find out.
Best Dow Stocks for 2014, #3: Cisco Systems, Inc. (CSCO)
Large-cap technology stocks haven’t been the real darlings of the market in some time, but all of that changed this year as three large-cap tech giants made it into the top four of this year’s 10 best Dow stocks.
Coming in third on this countdown is networking equipment firm Cisco Systems, Inc. (CSCO). Since the dawn of the Internet age, Cisco has been making key components that make the Internet “go,” and in 2014 the company continued doing just that.
The migration of big data to the cloud, the growth in Internet security and the expansion of what Cisco calls the “Internet of Everything,” or IoE, has given the company a new focus, and a new area to keep the profits coming in for years to come.
During its most recent quarter, Cisco reported record revenue of $52.1 billion from sales associated with the IoE, quite impressive for a firm that just keeping growing and keeping up with the technology of the day.
For shareholders, the company’s total return has more than kept up with the Dow’s year-to-date performance, nearly tripling the Industrial Average’s total return showing in 2014.
Best Dow Stocks for 2014: #2, UnitedHealth Group Inc. (UNH)
In 2014, we learned that the architects of the Affordable Care Act (ACA), or Obamacare, relied on the “stupidity of the American voter” to get the law to pass. This year, we also saw many healthcare stocks nicely adjust to the provisions in Obamacare. That was certainly the case for the second-best Dow stock in 2014, UnitedHealth Group Inc. (UNH).
UNH shares clocked in with a nearly 40% year-to-date total return, as the largest healthcare insurance provider in the country continued to build on its strong top- and bottom-line earnings beats during the year. In Q3, the company said fees associated with the ACA pulled down its total cash flow from operations by $1.3 billion, but despite the higher ACA taxes the company’s fundamentals remain sound, as does its outstanding share price performance.
In early December, UnitedHealth Group offered up earnings guidance for 2015, saying it expects full-year EPS of $6-$6.25, which is right in line with consensus estimates. The company also said that the increased ACA-related costs will not impede its growth going forward.
More importantly for the company and the stock, UNH has its eyes on increased participation in the ACA-mandated health exchange marketplaces. That’s a legislated increase in demand, and one that UNH shareholders are likely to profit from.
Best Dow Stocks for 2014: #1, Intel Corporation (INTC)
By far the biggest surprise this year in the Dow was the stellar performance of semiconductor giant Intel Corporation (INTC). The chipmaker’s shares vaulted to the top spot of Dow components in 2014, with a total return of an amazing 43.2%.
The reason this performance is so surprising is that for the past couple of years, we’ve all been hearing about the so-called death of the PC. Well, PC sales largely stabilized in 2014, and that was a boost to Intel’s bottom line.
The company also finally started cashing in on the capital investments it made in recent years, and it now expects to sell somewhere around 40 million tablet device semiconductor chips. Yes, it took a while for Intel to get its mobile/tablet chip business going, but better late than never.
For INTC shareholders, the company’s 7% increase in its quarterly dividend also is bullish, as it shows confidence in the chipmaker’s ability to keep delivering in the future. And while it’s not likely that INTC shares will deliver another near-50% total return in 2015, the chipmaker does seem to have figured things out here, and that means the upside for this top Dow stock is likely to continue in the months to come.
As of this writing, Jim Woods was long DIS, V.