The Dow Jones Industrial Average may be a fundamentally flawed index in terms of how it’s weighted — choosing to use price rather than the market cap — but in terms of what companies are in the index, the Dow Jones can’t be beat. Dow Jones stocks represent the “Bedrock of America” and some of the most important companies on the planet. There’s a reason why financial media still quotes the close and movements of the Dow Jones Industrial Average.
However, some of the thirty Dow Jones stocks are better than others. This is especially true when looking at what names will still be in the index down the road and continuing to lead in the world of business.
Some Dow stocks feature very forward-looking businesses models and operations. It’s these firms that will still be alive and kicking far into the future. And it’s here that investors can score on some future potential and the gains and dividends that come with it. In the end, while the Dow is still important, but some stocks within the index are just better than others.
With all of that said, you might be wondering: Which Dow Jones stocks have the best long-term potential? Here are three of the best stocks to buy from the index.
When it comes to long-term bets with the Dow Jones stocks, Visa (NYSE:V) has to be at the top of the list. The firm is one of the biggest plays on the continued shift toward a cashless society. And as one of the oldest and largest names in the space, V continues to dominate as we reach for plastic rather than cash.
The reason is Visa’s business model. The firm functions as a toll-road and collects fees from merchants, banks and other institutions every time someone uses a credit or debit card. V simply operates a secured payment network and moves money from one account to another. So, despite having a Visa logo on your credit card, V itself isn’t issuing credit or lending you money.
This middleman position is incredibly important for the future. More transactions continue to hit Visa’s network. Over the first three months of the year, Visa processed more than 47 billion transactions. This was a 9% year-over-year jump and it’s only growing further. With online commerce and fewer people using cash, Visa will be the dominant force going forward. The firm also continues to make inroads into additional services to keep upstarts like PayPal (NASDAQ:PYPL) at bay.
The best part of all of this is that V features very fat margins and amazing cash flow growth. More transactions on its network simply mean bigger profits for the firm. And it continues to share those profits with its investors — growing its dividend by 850% over the last decade.
The future cashless society will run on Visa. That fact makes one of the best Dow stocks to buy for the long haul.
Let’s be honest, as long people have children, Disney (NYSE:DIS) is going to be making money hand over fist. And lately, DIS has plenty of reasons to underscore that fact.
For one thing, its buyout of 21st Century Fox created a media powerhouse. This brought many major movie and T.V. franchises under one roof. And if anybody can monetize that content through a variety of channels, it’s Disney. And one of those ways will be its new streaming services.
Disney has already begun pulling its shows and movies from rival streaming services in order to make them exclusives to its new Disney+ service. That’s big because the vast of streaming is kids programming. With the complete Disney, Lucasfilm, Marvel and Pixar movie libraries as plenty of its original programming content from the Disney Channel, Disney+ will be the go-to channel for parents looking for entertainment.
When you combine with the firm’s new moves in its park and recreation divisions — such as Star War’s Galaxy Edge — as well as continued movie development from its studios, there’s a lot to like about DIS stock for the long haul. And we’ve already begun to see those results. Just take a look at Disney’s record second-quarter earnings. Those great results don’t even take into account streaming yet.
For investors, DIS stock is a perfect blend of growth for the long haul.
These days, that famous scene in The Graduate wouldn’t be about plastics, but about the cloud. Cloud computing, networking, the app economy continues to reshape how businesses and consumers do, well, everything. Which is why Dow Jones stock, Cisco (NASDAQ:CSCO) continues to be an amazing long-term pick.
CSCO’s bread-n-butter remains networking and communications equipment. It still builds all the switches routers, modems and other guts needed to make modern data centers and the internet/cloud computing function. This isn’t a bad business to be in as data center demand continues to grow. Analysts at Jones Lang LaSalle estimate that data center demand will double by 2021 as cloud adoption grows. That will send plenty of money Cisco’s way.
But the ace up Cisco’s sleeve has to be its newfound focus on services and software.
The firm now offers plenty of tangential products designed to go along with networking. They can not only build you a network but secure it, offer data analytics and other similar products to look after this equipment. These services often come with long subscription times and very fat margins. It’s here, that CSCO has quickly become a cash cow and one of the best dividend stocks in the technology sector.
Its approach on both equipment and services sales, coupled with rising overall data center demand, CSCO has the goods to keep growing far into the future.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.