I’m of the view that for the average investor, buy-and-hold investing may be one of the best ways to grow personal wealth. And, when it comes to financial returns, numbers speak louder than words. So, to demonstrate how successful long-term investing strategy can be, I like to look at a number of large cap, Dow Jones stocks every so often to see how much a single, $1,000 investment five years ago would be worth today.
This time around, I have picked out five stocks from the coveted Dow Jones Industrial Average. In 2019, the index was up about 22%. As our readers may well remember, many stocks started 2019 from a point of weakness. Therefore, most of the blue chip, Dow Jones stocks became strong performers during the year.
So, by taking a longer view that extends to five years, we can better gauge the importance of investing for the long-run. Let’s take a closer look.
What the numbers mean
Under each company name, I state how the price has changed over the past five years and what this change equates to in terms of the compound annual growth rate (CAGR). Then, I show how $1,000 would have fared since late 2014.
Please note that all of these companies pay regular dividends that can also be reinvested. However, the calculation below does not take into consideration the actual dividend or the reinvestment of that income.
Past prices are as of late-December 2014. Current prices are as of this writing at close on Dec. 24.
Finally, I have not factored in any brokerage commissions or taxes.
5-Year Returns for 5 Dow Jones Stocks: Apple (AAPL)
Apple (NASDAQ:AAPL) stock price has increased from $113.99 to $284.27.
$1,000 would have become $2,493.51.
AAPL is expected to report earnings in early February. In 2019, the company overall released strong quarterly results and launched a number of services, such as Apple News+, Apple Card, Apple Arcade and Apple TV+. Nonetheless, iPhone revenue is still its bread and butter business. If the recent trade truce between the U.S. and China continues well into 2020, the stock is likely to see increased iPhone demand in China — something that could easily boost earnings.
In 2019, broader markets performed quite well, and Apple stock — which is up about 89% over the past year — clearly outperformed many of its large cap peers. Therefore, there may be some volatility and short-term profit taking, especially prior to the earnings release date. Long-term investors may consider buying AAPL dips; Its current dividend yield stands at just under 1.1%.
Disney (NYSE:DIS) stock price has increased from $95.03 to $145.29.
$1,000 would have become $1,528.77.
DIS is expected to report earnings in February. As its streaming business is just getting started, analysts are likely to pay special attention to Disney+ metrics. For many viewers, content quality is extremely important when it comes to entertainment. The Disney brand, coupled with its powerful and unparalleled intellectual property (IP), will likely be the magnet that draws viewers to its streaming service.
I’d be a buyer of the shares, especially if the price drops to $130 or below. Also, its current dividend yield of Disney stock stands at 1.2%.
McDonald’s (NYSE:MCD) stock price has increased from $94.78 to $196.67.
$1,000 would have become $2,075.11.
McDonald’s will likely report earnings in late January. In terms of customer loyalty — a crucial metric in the restaurant business — McDonald’s is among the top-scoring chains. In addition to its food and drinks revenue, the group also has an impressive real estate portfolio. And that is partly why I’m always interested in MCD shares.
Last quarter of 2019 has seen the MCD stock price pullback from a 52-week high of $221.93 on Aug. 9 to the current $199 level. In early November, CEO Steve Easterbrook resigned as a result of a personal relationship with another McDonald’s employee — a factor that weighed in the the fall in the stock price. Now, investors have a better entry point into MCD stock. Its current dividend yield stands at 2.5%.
Microsoft (NASDAQ:MSFT) stock price has increased from $47.88 to $157.38.
$1,000 would have become $3,286.96.
Earlier in the month, the Financial Times named Microsoft CEO Satya Nadella its “Person of the Year.” He has been credited with recognizing the growing importance of the cloud business, especially at the enterprise level.
MSFT will likely report earnings in late January, and many analysts are expecting the company to gain further market share in the cloud space. Long-term investors looking for robust capital gains should consider buying the stock at every weakness. Its current dividend yield stands at 1.3%.
Walmart (NYSE:WMT) stock price has increased from $86.91 to $119.51
$1,000 would have become $1,375.24.
WMT is expected to report earnings in February. The group’s recent robust third quarter earnings report showed growth in its domestic operations as well as e-commerce. Therefore, the Street will analyze these key metrics closely to see if they have accelerated in the holiday season, too. With a late Thanksgiving, retailers have had a shorter shopping season in 2019. So, the Street will be watching fourth quarter sales numbers, not just from Walmart, but from its competitors, too.
In the past few weeks, Walmart stock has been trading near all-time highs. The run up in price since August, as well as its forward price-earnings ration (P/E) of 23.7, are making me wonder if there may be some profit-taking around the corner. Finally, its current dividend yield stands at 1.8%.
Over the past five years, all five of these Dow Jones stocks have been good investments. Shareholders in any one of them would have also received dividends, and that passive income would have increased the returns — especially if those dividends were reinvested.
It would also be correct to say that AAPL and MSFT have especially been growth stocks leading the market higher.
If you are new to investing or do not feel comfortable analyzing individual stocks, then you could also buy into an ETF that tracks the Dow Jones Industrial Average.
While past performance may not exactly repeat in the months ahead, the index’s track record highlights its growth potential. It is home to many well-managed conglomerates that have robust earnings and are bellwethers of our economy. Thus, an ETF such as the SPDR Dow Jones Industrial Average (NYSEARCA:DIA) or iShares Dow Jones US ETF (NYSEARCA:IYY) may be appropriate for many portfolios.
Understandably, investors are wondering how much longer the rally in broader markets and individual names can last. I believe the numbers from many blue-chip companies indeed show that robust, long-run returns are likely to be achieved in the future, too. It would take a brave contrarian to bet against the positive trend not continuing over the next decade.
As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.