the Dow Jones Industrial Average includes several companies that stand out as an ideal solution for investors looking for brand leadership and dividend payouts. Three companies in particular that offer forward-looking earnings growth include the world’s leading manufacturer of construction and mining equipment, caterpillar (NYSE: CAT); Walt disney (NYSE: DIS), the main giant in the media industry; and Nike (NYSE: NKE), the world leader in footwear, clothing and sports equipment.
All three of Dow’s stocks are expected to benefit from changing economic factors over the coming year, suggesting further growth in stock prices. Let’s take a closer look.
1. This caterpillar is ready to fly
Over the past year, while DJIA has gained around 19%, Caterpillar stock has gained around 13.4%. Part of the reason for the decline in the growth rate is simply that over the past six months investors have taken profits. From mid-March 2020 to May 2021, the share price climbed more than 107%, supported by signs of a post-pandemic rebound and an improving outlook. Since hitting those 52-week highs in May, Caterpillar stock has fallen about 16.3%.
Given that construction equipment sales are generally tied to an increase in residential construction, housing starts in November should give investors confidence. November housing starts rose at a rate 8% higher than in the same month last year, making it the second highest month of housing starts in the United States this year (after March alone) with 1.7 million new housing starts. Another accelerator that, combined with strong construction demand, paves the way for increased growth in the first half of 2022 and beyond is the recently adopted $ 1,000 billion infrastructure finance program. The infrastructure package includes a 35% increase in highway spending from the current authorized allocation of $ 46 billion.
In addition to growth in the United States, Caterpillar expects growth in other parts of the world, including China, India and Indonesia. Combined in the United States, these four regions account for 58% of the planned global expansion and have helped the company increase its sales in the construction and mining sectors by 30% year-on-year. another in the third trimester. Total revenue increased 25% year-over-year for the quarter, while profit margins increased 3%, driven by higher end-user demand for equipment and services as well as at favorable prices.
This level of growth may continue as a compound annual growth rate of 4.3% is forecast for the global construction equipment market through 2027 driven by the increasing development of public infrastructure and increasing population. in emerging markets, leading to increased demand for equipment.
Not to be overlooked, it’s also worth noting that Caterpillar pays a solid annual dividend of $ 4.44 per share at a yield of 2.3%. By comparison, the S&P 500the average dividend yield of is 1.3%. The company also boasts of being a dividend aristocrat by increasing its dividend each year for at least 25 consecutive years, including a 7.8% dividend increase this year.
2. Nike is running thanks to local demand and high prices
An investment in Nike is not without its challenges, but it offers investors brand stability and dividends. Most of the concerns about Nike stem from supply chain constraints and political discord between the United States and China. Several analysts, including Camilo Lyon of global financial services company BTIG, point out that the Chinese market is slowing its overall growth because Chinese consumers increasingly favor domestic products. Sales in China were down 20% year-on-year in the last quarter. Fortunately, a 12% increase in sales in North America and a 6% increase in the Europe, Middle East and Africa region are helping to offset the declines in China.
Outside of China, Nike continues to face challenges brought on by plant closures linked to COVID-19. In Vietnam, the company still does not have 100% of its factories fully operational. With 80 percent production capacity, CFO Matt Friend believes a rebound is underway and supply levels will normalize heading into the second half of calendar year 2022, which he considers. like a year of recovery for the company.
The word ârecoveryâ may make some investors nervous, but it can also set the stage for a better entry point for a long-term strategy. If a recovery is expected in the first half of the year, now is the right time for opportunistic investors to step in and could likely push up the share price in anticipation of a strong second half.
As part of its own long-term strategy, Nike continues to focus on digital sales, which jumped 11% year-over-year in the last quarter, highlighted by 40% growth. in North America. The company has also decided to sever ties with DSW, one of the leading shoe retailers, as it aims to channel more sales through its own stores and online presence.
Speaking of online presence, Nike has also submitted new trademark applications as it appears to be taking advantage of the metaverse. The company intends to manufacture and sell virtual sneakers and clothing. The applications also include: downloadable virtual goods, retail store services and entertainment services. We’ll see how these play out, but with a globally identifiable leading brand like Nike on the verge of engaging consumers via the metaverse, it could take revenue to a whole new level.
3. Disney intends to immerse consumers in the metaverse
Not too long ago, Disney was celebrating a crazy third quarter, beating Wall Street estimates for revenue, profits and subscriber growth. At the time, its stock price jumped 5% overnight. Concerns about the pandemic were fading and parks were resuming their strength to reach their full capacity. As soon as the positive news arrived, it is now overshadowed by concerns of a decline in the growth of subscribers to streaming services.
During the fourth quarter, the company experienced both sequential and year-over-year revenue growth. In addition, streaming service subscriptions totaled 179 million, growing at a rate of 60% year over year. The problem? Subscriptions for the quarter were 118 million, 1.2% below consensus estimates.
Disney CEO Bob Chapek told investors that delays in film production and subsequent theatrical release schedule would also impact the availability of content on its streaming services. The company also continues to incur costs to meet government regulations and implement pandemic-related safety measures. While 2020 has seen some of the full impact of COVID-19, 2021 has seen a full year of impact, and now the omicron variant is skyrocketing as we move into 2022. This information hasn’t pleased analysts well. and investors. The result? A drop in stock prices of around 12% in the past two months.
Headwinds in the near term will be a nuisance for investors, but in the face of the challenges, Disney has a full pipeline of releases and revenues continue to grow, albeit somewhat constrained. But the company should rebound well once the parks reach capacity and new content rolls out. The company has also made known its desire to enter the metaverse realm, blending the physical and digital for consumers through its park experiences and streaming content.
Upcoming releases, including streaming spin-offs of the highly successful Avengers and Star wars lines, should pave the way for revenue growth. A rebound in stock prices could start early in the year as investors seek growth in streaming subscriptions, a reduction in costs related to COVID-19 production delays and a return to park attendance levels. ‘before the pandemic. And as more information is released on Disney’s plans for 2022, I would expect the stock price to climb quickly. The force is strong with Disney.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.