Since the inception of the Dow Jones Industrial Average (DJIA) in 1896, it has historically been a go-to measure of overall U.S. stock market performance. 

The DJIA is a price-weighted index, unlike other major equity indices which are market-cap weighted. In recent years, the DJIA has drawn criticism due to its calculation methodology and has been viewed as secondary to the S&P 500 by some market participants. A shake-up to the constituents of the index following a four-for-one stock split by Apple may likely recalibrate the index to be more reflective of the U.S. stock market and economy going forward. 

At its beginning in 1896, the DJIA consisted of 12 staple U.S. industrial companies including American Cotton Oil Company (now Unilever), Chicago Gas Company (now People’s Gas) and General Electric. As companies, the U.S. and the world have evolved, changes have been made periodically to the constituents of the index to maintain its original purpose of being a go-to measure of overall U.S. stock market performance. 

Today, the DJIA is made up of 30 large cap companies on U.S. stock exchanges from various industries including Information Technology, Health Care, Industrials, Consumer Staples, etc.

Based on the observed values of major U.S. indices such as the S&P 500, Nasdaq Composite and DJIA, the U.S. stock market appears to have all but recovered since its low point in late March 2020. However, some questions have surfaced. 

What has been the breadth of the stock market recovery? What impact did COVID-19 and the economic downturn have on companies’ revenues, profit margins, earnings and dividends? 

Duff & Phelps analyzed each of the 30 companies currently in the DJIA to answer these questions. Indeed, the stock market had a V-shaped recovery based on the major stock market indices, but digging deeper, the story is different for each company. Revenue and profit margins deteriorated quickly in the second quarter of 2020 for most companies, but there were some bright spots. In addition, most of the companies in the DJIA didn’t reduce or eliminate dividends to their shareholders during this economic crisis. In fact, many increased them.

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