Make a move on these big-name giants while they’re on sale.
The Dow Jones Industrial Average is a cornerstone of Wall Street, a yardstick for market vitality encompassing 30 colossal companies that embody the apex of profitability, diversity, and global reach. Naturally, investors flock to seek out the most economical stocks within the Dow.
But not all Dow components are created equal; some may seem lackluster on the surface, catching the discerning eye of value hunters. When it comes to identifying undervalued equities swiftly, look no further than earnings yield.
In contrast to the ubiquitous P/E ratio, earnings yield offers a unique perspective by exhibiting profitability per share. The higher the yield, the more profitable the investment in relation to its share price.
Scouring for lofty earnings yields uncovers opportunities to acquire stocks at bargain prices. These three Dow titans boast the cream of the crop in terms of earnings yield.
Verizon Communications (VZ)
Source: RAMAN SHAUNIA / Shutterstock.com
Earnings yield: 6.50%
Verizon Communications (NASDAQ:VZ), the second-largest wireless carrier in America, operates through two primary segments:
- Verizon Consumer Group: encompasses wireline and wireless services bearing the Verizon insignia.
- Verizon Business Group: oversees enterprise services.
Featuring a generous dividend and a modest trading price, Verizon holds irresistible appeal for income-oriented investors. Despite modest stock performance in recent years, its lofty dividends and potential for respectable returns position it as a compelling asset for any seasoned investor’s portfolio.
Poised on the brink of the Spectrum Pipeline Act of 2024, Verizon stands to capitalize on burgeoning growth opportunities as the clamor for bandwidth and enhanced connections catapults the company into the vanguard of the forthcoming mobile data surge.
Financially, Verizon has weathered fluctuations. While consolidated operating revenue for FY’23 experienced a 2.1% drop and EPS dwindled from $5.06 to $2.75, the company excelled in wireless service revenue, fixed wireless net additions, and overall wireless postpaid net additions. Enhanced demand for fixed wireless solutions and premium-rate data schemes fueled the uptick in wireless service revenue, a trend primed for further exploitation.
Free cash flow surged by an impressive 30%, kindling cautious optimism for the 2024 prospect. The company anticipates a 2-3.5% surge in total wireless service revenue over the year. Bolstered by robust dividends, market dominance, and a soaring earnings yield, VZ emerges as a prime Dow Jones contender for discerning investors.
Cisco Systems (CSCO)
Source: Valeriya Zankovych / Shutterstock.com
Earnings yield: 6.65%
Ubiquitous among internet users in professional circles, Cisco Systems (NASDAQ:CSCO) is a linchpin in network infrastructure, specializing in routers and end-to-end security setups. Renowned for reliability in the enterprise and office milieu, Cisco’s networking, security, and collaboration solutions furnish businesses with streamlined operational frameworks.
Recently, the company unveiled a suite of innovative collaboration tools tailored for the hybrid work environment, including the Cisco Board Pro G2 and Cisco Desk Phone 9800 Series. These innovative tools underscore Cisco’s commitment to fostering collaborative workflows and workspace customization, ensuring their product line aligns with evolving office dynamics.
Despite a marginal recession in Q2’24 on certain performance metrics – a 6% revenue dip and a 3% YoY decrease in GAAP EPS – Cisco witnessed a 6% uptick in total annualized recurring revenue (ARR). Segments like Security, Collaboration, and Observability experienced growth, although the Networking division, a linchpin revenue stream, recorded a 12% contraction.
The company also upped its dividend by 3%, signaling a dedication to shareholder value. CFO Scott Herren affirmed, “We are making noteworthy strides in transitioning to a more recurring revenue-centric business model while upholding financial prudence, operational leverage, and shareholder rewards, as evidenced by the enhanced dividend payout.”
Defined by steadfast growth initiatives, operational efficiency, and unwavering income streams, Cisco stands as a steadfast long-haul value investment choice.
Chevron Corporation (CVX)
Chevron Corporation: A Steady Ship in Turbulent Waters
Chevron: Navigating the Sustainability Wave
Chevron Corporation (NASDAQ: CVX) stands tall as a leading figure in the global shift towards a sustainable, low-carbon future. Its wide-ranging operations encompass activities from oil and natural gas exploration and development to refining and specialty products.
A Bright Spot Amidst Volatility
Despite its stock’s price trajectory being closely intertwined with the fluctuations in commodity prices, recent developments in the global gas market present a compelling buying opportunity for Chevron.
Mixed Signals in 2023
Chevron’s full-year report for 2023 portrays a mixed picture, with a noticeable decline in revenue and net income. Nonetheless, the company managed to allocate a significant $26.3 billion to shareholders during the financial year. An 8% increase in the quarterly dividend to $1.63 per share underscores Chevron’s steadfast commitment to its investors.
Furthermore, Chevron achieved a record output of 3.1 million barrels of oil equivalent per day, driven by a remarkable 14% surge in U.S.-sourced products. In the face of challenging commodity price conditions in recent times, Chevron’s diversified business portfolio positions it favorably as a long-term player in the market.
Adding to its appeal, Chevron’s robust natural gas production serves as a reliable support for a sustainable economic landscape.
Charting a Stable Course Forward
Chevron’s strategic positioning to cater to evolving market demands solidifies its standing as one of the most attractive options among the cheaper Dow Jones stocks. As the company continues to adapt to changing market dynamics, its resilience and proactive approach make it a beacon of stability in turbulent times.
Author Rick Orford, a seasoned investor and influencer, shares valuable insights without holding any positions related to the securities discussed. His expert opinion underscores the promising trajectory of Chevron as it steers through the intricate waters of the energy sector.
