The Dow 30 is a select group of stocks representing prominent companies in a variety of industries and sectors. A common characteristic of Dow stocks is their status as blue-chip stocks.
Since blue-chip stocks are known for their stability, Dow stocks wouldn’t normally be on a list of stocks to sell. However, many of the stocks on the list do serve as proxies for the broader market. And with all the volatility in the market today, it’s not surprising that some of these 30 stocks might not be great buys.
The bottom line is these are buy-and-hold stocks in a market tough for buy-and-hold investors. If you’re looking to take a nimbler approach, here are three Dow stocks you may want to part company with until there is more clarity on the stock’s outlook.
International Business Machines (IBM)
One thing you can say about the performance of International Business Machines (NYSE:IBM) stock. It’s been consistent. IBM stock has been range-bound for much of the last 10 years. And the last 12 months are indicative of that larger pattern. The stock is up 17% over the last 12 months, but just 1.1% in 2023. It’s up 9% in the last three months, but down nearly 2% in the last 30 days.
That fits into the sideways pattern that continues to frustrate growth-oriented investors. The company is executing a transition to become a larger player in the software/cloud space. Analysts aren’t giving IBM their full-throated endorsement yet, but there is some positive sentiment. Nonetheless, a primary area of concern with IBM is the company’s debt-to-equity ratio, which sits at an uncomfortable 2.28.
However, the saving grace of Big Blue remains the dividend. IBM is a dividend aristocrat that has increased its dividend for 30 consecutive years. The rate of that growth is a bit underwhelming, and with a payout ratio currently over 300%, that dividend is one to watch. If you currently own IBM, the dividend may be enough to keep you engaged. Otherwise, you may be better off waiting for clearer evidence of growth.
3M (MMM)
Another stock struggling to hold investor interest is 3M (NYSE:MMM). The company was an automatic winner for investors for many years. But the last few years have made MMM stock one of the worst-performing stocks. The stock is down 24% in 2023, but if you go back to June 2021, the stock price is down more than 50%.
By now, investors are familiar with the legal battles surrounding the company’s earplugs and its use of forever chemicals. A few hurdles still exist, but those lawsuits are winding down. And normally, I’m a believer that the known is better than the unknown. However, in the case of MMM stock, the settlement may raise more questions.
Specifically, now that investors have a settlement figure, the question turns to how the company will pay for that. It’s coming out of earnings, that’s for sure. But will it affect the company’s dividend? 3M is a dividend king, having increased its dividend for 66 consecutive years.
That’s not an easy thing to walk away from. But in the face of slowing consumer demand, it may be the prudent step for the company to take.
Intel (INTC)
Intel (NASDAQ:INTC) is an example of two things being true. First, Intel is enjoying a renaissance as it moves away from being a chip designer for personal computers to a foundry that allows it to make its own chips. Second, it may be several quarters before investors get a clear signal that the turnaround will be a catalyst for the company and for INTC stock.
In the first two quarters of 2023, Intel’s revenue and earnings are sharply lower when compared to the prior year. And the earnings picture is the most troublesome. While Intel has beaten analysts’ estimates, the company has still posted negative earnings in the last two quarters. And its dividend was a casualty.
Yet, INTC stock is up 29% in 2023. That suggests something has to give. And in this case, analysts are saying the company’s growth is priced into the stock. I can appreciate that IBM’s CEO Patrick Gelsinger and several prominent members of Congress bought shares of INTC stock recently. But, with a reduced dividend and uncertain macroeconomic outlook, it’s a difficult stock to recommend.
On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
