The Dow Jones Industrial Average consists of 30 large stocks that have been chosen in an effort to represent the major components of the U.S. economy. As a result, for conservative investors looking for major names from multiple sectors of the American economy, the index is a reasonable place from which to start.
And at a time when the stock market’s rally has been broadening beyond tech stocks, investing in other sectors is wise. Of course, as always, it’s important to select the shares of companies that are in well-positioned sectors, have been performing positively and have attractive or at least reasonable valuations, along with strong, upcoming, positive catalysts.
So let’s examine three such Dow stocks, even if you can only buy just one..
American Express (AXP)
American Express (NYSE:AXP) delivered commendable fourth-quarter results, along with excellent full-year guidance. Moreover, the credit card network should continue to benefit significantly from future U.S. consumer spending trends.
In Q4, AXP’s net income climbed 23% versus the same period a year earlier to $1.93 billion. Additionally, its “revenues net of interest expense” advanced 11% year-over-year (YOY) to $15.8 billion. For all of 2024, the firm predicts that its earnings per share will come in at $12.65-$13.15. That’s well above its 2023 EPS of $11.21.
Further, the job market remains strong and unemployment stays low. So, AXP should continue to benefit from upbeat consumer spending trends going forward. Also importantly, the shares have an attractive forward price-earnings ratio of 16.8 times. And the dividend yield of 1.3% is significant.
Finally, Warren Buffett has owned a significant amount of AXP stock for many years, giving the name his stamp of approval.
Goldman Sachs (GS)
In a note to investors on March 26, Morgan Stanley (NYSE:MS) wrote that “money center banks” should get a big boost from the stock market’s recent gains, increases in mergers and acquisitions and debt-raising deals. MS named Goldman Sachs (NYSE:GS) as one of these five money center banks. Morgan Stanley maintained an overweight rating on GS stock.
Additionally, Goldman Sachs delivered good Q4 results as its sales rose 7% versus the same period a year earlier to $11.3 billion. And, its net income increased to $2 billion from $1.3 billion in Q4 of 2022.
Also importantly, Goldman succeeded in raising a huge $251 billion from investors last year. The proceeds funded the bank’s initiatives in many diverse areas, including credit, equity, real estate and hedge funds. With the economy humming along, its investments in those areas should generate very strong returns.
GS stock has a low forward price-earnings ratio of 11.6 times and a significant dividend yield of 2.65%.
Caterpillar (CAT)
As of March 22, Caterpillar (NYSE:CAT), in accordance with my previous, upbeat view of CAT stock, had climbed 22.4% in 2024. This makes it the Dow’s second-best performer since the beginning of the year.
The firm continues to have multiple positive catalysts. Those include high U.S. infrastructure spending and strong mining activity as the demand for many metals from the electric vehicle and renewable energy sectors remains high. Additionally, CAT should keep benefiting from the construction of many data centers. And, the rebound of oil prices and the better-than-expected performance of the Chinese economy should also boost its financial results.
In 2023, CAT’s sales rose 13% YOY to $67 billion, while its earnings per share, excluding certain items, soared 53% to $21.21. CAT stock has an attractive forward price-earnings ratio of 17.5 times and a significant dividend yield of 1.4%.
On the date of publication, Larry Ramer held Goldman Sachs bonds and his wife held a long position in AXP stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
