The Dow Jones Industrial Average is made up of some of the most sturdy and profitable stocks on the market. The 30 members of the index are chosen partly for their strong track records of growth and profit generation, but also for qualitative aspects such as reputation and popularity among investors. The resulting list is an elite club of great American companies.
Many investors would be happy owning a piece of each of these stocks through an index fund. But that’s not the only way to add some Dow exposure to your portfolio. If you’re willing to take on more risk, consider purchasing individual members of the Dow instead.
But which ones are worth owning over the others? Home Depot (HD -1.05%) and Coca-Cola (KO -1.10%) look like great options for 2025 and beyond. Read on for some good reasons to add these stocks to your portfolio.
1. Coca-Cola
Coke will announce its fourth-quarter earnings report in mid-February, but investors don’t have to wait until then to pick up shares of the beverage titan. Management’s last earnings report contained plenty of good news about the business. Organic revenue was up 9% in Q3 and is on pace to rise by 10% for the full year. That outlook figure marked a slight upgrade from the prior quarter and is near the top of Coke’s long-term growth targets. The company also posted higher profitability and ample free cash flow.
The bad news is that Coke’s recent growth has come almost entirely from price increases. Investors will want to watch for a return to volume growth in key markets like the U.S. in 2025. Without that rebound, the stock may underperform the market for a third straight year.
But long-term investors can hold the stock while they wait for Coke to recover its volume gains with help from popular tea, sports beverage, and sparkling water brands like Powerade, Fuze Tea and Topo Chico. In the meantime, sit back and collect the stock’s dividend, which today yields just over 3%.
2. Home Depot
According to billionaire investor Warren Buffett, the right time to buy a great business is rarely when things are looking fantastic for the company and the wider economy.
“If you wait for the robins, spring will be over,” Buffett has quipped. Maybe it’s time to apply that opportunistic approach to Home Depot, whose stock was left out of last year’s rally due to major challenges in the housing and home improvement markets. It’s not easy to run a retail business with many expensive items when consumers and businesses are pinching pennies.
Those pressures have impacted the business, of course. Home Depot said in mid-November that comparable-store sales declined 1% in the core U.S. market and are on pace to fall by 2.5% for the full 2024 year. Yet Home Depot has thrived through many market declines in the past, and it’s likely it will come out of this one in a stronger position as well. Meanwhile, the industry leader is outperforming rival Lowe’s on sales growth and profit margin, which bodes well for the eventual market rebound.
That recovery may or may not start in 2025. The biggest clue will be a return to growth in customer traffic, which was down 1% in the three quarters that ended in late October. But investors holding this Dow stock should still be happy with the company’s steady market share gains and its high return on invested capital. These financial successes will allow Home Depot to keep returning cash to shareholders through 2025 and beyond as its growing dividend and stock buybacks amplify investors’ long-term returns from here.
Demitri Kalogeropoulos has positions in Home Depot. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe’s Companies. The Motley Fool has a disclosure policy.
