Can the Least Successful Dow Jones Stocks of 2024 Outperform the S&P 500 in 2025?
2024 saw a stellar year for major stock market indexes, but the Dow Jones Industrial Average (DJI) lagged behind with a 12.9% return, compared to the S&P 500's 23.3% and the Nasdaq Composite's 28.6%. Eight out of the 30 Dow components ended the year in the red, all of which are dividend-paying value stocks from diverse industries. Let's delve into these companies to determine which dividend stocks are worth considering for investment in 2025.
Turnaround Candidates
2024 wasn't kind to Boeing (BA) and Nike (NKE), with Boeing finishing as the worst-performing Dow stock. Boeing's business model has been challenged due to the COVID-19 pandemic, issues with the release of the 737 MAX, supply chain challenges, inflation, and safety concerns. The door plug incident on a 737 MAX flight in 2024 opened a new wave of concerns.
On the other hand, Nike's multi-decade dominance in the shoe and athletic apparel market is under threat, with competitors capturing market share while Nike struggles to adapt to buyer behavior trends. Sales growth has stalled, and margins have taken a hit due to an unsuccessful transition from wholesale distribution to direct-to-consumer sales.
Both companies experienced turbulent years, but there's potential for a turnaround. Boeing and Nike have new leadership, which lowers expectations, making it easier for the stocks to rally if the companies improve their outlook.
Nike
Nike is facing increased competition in the shoes and athletic apparel market. The company's moat, traditionally a significant advantage, has weakened. Competitors have seized sales and margin growth while Nike has struggled to identify buyer behavior trends. Its sales growth has stalled, and margins are down, as the transition from wholesale distribution to a blend of wholesale and direct-to-consumer has been unsuccessful.
However, Nike's stock is at an eight-year low, and expectations are low, providing an opportunity for investors. The business could improve, leading to a rally in the stock. But Nike operates in a cyclical industry and is heavily exposed to international markets, particularly China. Investors should only consider the stock if they believe in the brand's long-term growth and are prepared for periods of volatility. Nike boasts a decent dividend yield of 2.1%, providing an incentive to stay patient.
Boeing
Boeing has struggled due to the COVID-19 pandemic, 737 MAX issues, supply chain challenges, and inflation. The company cut its dividend during the pandemic and hasn't reinstated it since, making it a pure-play turnaround candidate with no passive-income potential at this time.
However, Boeing is seeing positives. The company received a large order for 737 Max airplanes in December 2024, while a new CEO and improving safety measures could lead to production increases. After a year of declines, Boeing now has the opportunity to recover and potentially soar once again.
Heavily-Weighted Sector with High-Yield Stocks
The healthcare sector has become a significant portion of the broader market, with big-name healthcare stocks playing a critical role in the Dow. Despite the sector selling off heavily in the final three months of 2024, the valuations of these companies are attractive, making them potential winners in 2025 if investors shift their focus towards value stocks over growth.
Amgen (AMGN)
Amgen has increased its dividend for 12 straight years and currently yields 3.5%. Clinical trials for its weight loss drug are going well, which could serve as a significant catalyst for the stock. The company is also exploring new growth opportunities, making it an attractive value stock in the healthcare sector.
Merck (MRK)
Merck is a massive pharmaceutical company with reliable earnings, dividend growth, and a current yield of 3.2%. However, it faces increased competition, which has forced the company to work on expanding its product pipeline. Merck is one of the best value stocks in the healthcare sector for those confident in its innovation and ability to meet the competition.
Johnson & Johnson (JNJ)
Johnson & Johnson's growth has been lackluster lately, but it continues to generate gobs of free cash flow and has over 60 consecutive years of dividend increases. The company's high yield of 3.4% makes it an appealing choice for passive income generation.
UnitedHealth Group (UNH)
UnitedHealth's stock took a hit at the end of 2024 due to controversies and regulatory concerns, but it's worth considering if new management can manage to quell investor concerns and drive growth in 2025.
Ultra-Reliable Dividend Stocks
McDonald's (MCD) finished 2023 nearly at an all-time high. The company's franchise business model makes it highly resistant to recessions, and its long history of dividend increases and 2.5% yield make it an excellent choice for long-term investors.
Chevron (CVX) is another industry-leading dividend stock, boasting 37 consecutive years of dividend increases and a sizable 4.1% yield. Chevron's diversified business across exploration, production, and marketing makes it a reliable choice for passive income generation, regardless of market cycles.
There's no guarantee of what the market or these eight stocks will do in 2025. Focus on the companies that best fit your portfolio and that you're most interested in instead of trying to time the market. Boeing and Nike are compelling turnaround plays, while healthcare stocks and ultrareliable dividend stocks like McDonald's and Chevron present growth opportunities. Consider these eight high-yield dividend stocks for your investment portfolio in 2025.
- Given the challenging year 2024 was for Boeing and Nike, some investors might consider these companies as potential turnaround opportunities for their investing portfolio in 2025, taking into account their new leadership and the possibility of improved outlook.
- In the context of the healthcare sector, which has become a significant portion of the broader market, investors looking for high-yield stocks might find attractive valuations in companies like Amgen, Merck, Johnson & Johnson, and UnitedHealth Group, considering their dividend yield and growth potential, particularly if they shift their focus towards value stocks in 2025.