Three Dow Dynamos That Helped The Benchmark Reach A Record High
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In case you haven’t heard, the Dow Jones Industrial Average waltzed to a record high March 5, crushing the old time high of 14,164.53 hit on Oct 9, 2007. Leading the Dow’s historic dance were Home Depot (NYSE: HD), International Business Machines (NYSE: IBM) and McDonald’s (NYSE: MCD), up 108%, 75% and 67% respectively since the October 2007 peak.
The three have little in common except that they represent stocks that tend to hold up in both good times and bad. Here's why the trio warrants a place in your portfolio.
Home Depot is the world’s largest home improvement retailer. The company benefited from the slump in the housing market during the economic downturn as homeowners spent money on sprucing up their home’s interior and exterior as they found themselves spending more time around the house and less time eating out or on vacations. Currently, Home Depot is benefiting from the rebound in the economy and the improving housing market.
The company is a giant, sporting a market cap of 105.77 billion. Its P/E is a reasonable 23.56. Fourth quarter earnings were 68 cents a share, up from 50 cents in the same quarter a year ago. Guidance for the full year is EPS of a healthy $3.57.
Home Depot’s board just authorized a $17 billion share repurchase program and declared a 34% increase in its quarterly dividend to 39 cents per share.
Business is expected to remain brisk as clean up from Superstorm Storm continues and housing rebounds.
IBM, a multinational technology and consulting company, manufactures and markets a bevy of tech components from hardware to software. It also offers infrastructure, hosting and consulting services. The firm is an unrivaled pioneer in its industry.
The Armonk, N.Y. based company has held the record for the company generating the most patents for 20 years. This innovative tech behemoth has moved swiftly and successfully into cloud computing. Cloud, the next big thing that is already here, streamlines how software, business processes and services are accessed. This explosive technology helps businesses scale operations and optimize investments. More and more companies are finding cloud services lower costs, make for more efficient business models and grow profits.
A favorite of Berkshire Hathaway’s Chairman Warren Buffett since 2011, the investment guru continues to add to his position. IBM now accounts for 18.6% of Buffett’s portfolio.
IBM has a modest P/E of 14.45, yields 1.63% and has a strong history of repurchasing shares.
Buffett said on CNBC that American businesses are presently a great place to put your money. More specially, American businesses that “are earning good money, that have high returns on equity, have high returns on incremental capital, are buying their stocks at a rapid rate so that your ownership in the business increases significantly.” In that statement, he was describing IBM.
McDonald’s has morphed from a burgers and fries joint into a multifaceted global casual dining spot. It is one of the most popular and recognized brands in the world. That has given it an inherent advantage over competitors. Also giving it a distinct edge is its hefty number of stores in heavily trafficked areas, unparalleled ad budget and new product introductions like Fish McBites and regional friendly breakfast items, which continued to woo and wow customers.
The Chicago based company is quick to adjust to shifts in the economy, changing palates and health conscious consumers and advocates.
Shares trade at a moderate P/E of 18 and carry a dividend yield of an appetizing 3.18%.
Diane Alter has no position in any stocks mentioned. The Motley Fool recommends Home Depot and McDonald's. The Motley Fool owns shares of International Business Machines. and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!