These 3 Dow Stocks Are Set to Soar in 2024 and Beyond

These 3 Dow Stocks Are Set to Soar in 2024 and Beyond

Although it covers relatively few stocks, the Dow Jones Industrial Average is often considered an indicator. Its 30 constituents have seen significant changes, and while many slow-growing stocks remain in the index, it also includes many of today’s largest and fastest-growing companies.

This means that some of the Dow Jones companies will continue to fly high. If you want exposure to the Dow and the potential for significant growth, these stocks could serve you well over time.

Amazon

Indeed, AmazonIt is (NASDAQ:AMZN) $1.9 trillion market capitalization makes growth difficult. This means it must generate more revenue and profit than much smaller companies to achieve the same growth rates.

However, Amazon has found a unique workaround. Its online sales business, which represents its largest source of revenue, is a low-margin business that supports smaller, more dynamic businesses. This includes advertising, subscriptions and services from third-party sellers.

Additionally, Amazon Web Services (AWS), its cloud computing business, accounted for $25 billion of Amazon’s $143 billion in revenue for the first quarter of 2024. However, thanks to its higher operating margin , it accounted for $9.4 billion of Amazon’s more than $15 billion. in operating income.

The AWS segment gives it a much smaller base through which it can grow profits more quickly. Indeed, first-quarter net income of $10 billion was up 225% from year-ago levels. This increase likely contributed to the nearly 60% rise in Amazon’s stock price over the last year.

Furthermore, while triple-digit earnings growth likely isn’t sustainable, it makes its price-to-earnings ratio, near a multi-year low, look cheap. Such conditions should support Amazon’s growth despite its size and stability.

Visa

Despite its massive size, Visa (NYSE:V) has enormous growth potential. Its global payments network continues to play a more crucial role in the economy as society becomes increasingly cashless.

It remains a leading (or arguably dominant) service provider with its credit and debit cards and merchant terminals. In 2023, 61% of all credit cards in the United States came from Visa. It was long before MasterCard at 25% and American Express At 11 o’clock%.

These 3 Dow Stocks Are Set to Soar in 2024 and Beyond

Market share of card brands in the United States, 2007-2023

Considering the volume of global transactions, this represents a staggering gross payment volume, from which Visa collects a small fee.

However, its main source of revenue is data processing fees. This involves services such as clearing, settlement, network access and other related services. International transaction fees and other services make up the rest of its revenue.

In the fiscal second quarter (ended March 31), Visa reported revenue of $8.8 billion, up 10% from a year ago. Likewise, its net profit of $4.7 billion also increased by 10%.

This growth has helped push consumer credit stocks up more than 20% over the past year. Additionally, its P/E ratio of 31 is lower than the average multiple of 35 over the past five years, a factor that could attract more buyers. Given industry trends, Visa’s growth is expected to continue for a long time to come.

McDonalds

Certainly, investors might not view favorably McDonalds (NYSE:MCD), given concerns about rising prices and wages. Media reports about the dreaded “$20 happy meal” may have contributed to restaurant stocks entering correction territory.

However, a happy $20 meal isn’t likely to happen anytime soon. Even if this were the case, McDonald’s business model protects it from these effects. Most of the company’s high-margin revenue comes from building rentals and franchise fees – fixed amounts that don’t vary based on sales. Additionally, the 4-5% of gross revenue owed to the company likely increases with inflation, blunting the effects of rising prices.

Indeed, financial stocks continue to progress. In the first quarter of 2024, revenue of $6.2 billion increased 5% from last year. With this increase, the company earned more than $1.9 billion, an annual increase of 7%.

Additionally, investors should not forget about the annual dividend of $6.68 per share. Its dividend yield of 2.6% is about double that S&P500 average of 1.3%. More importantly, it has increased every year since McDonald’s introduced the dividend in 1976. This increasing yield makes it more attractive, especially to long-term shareholders.

Additionally, its P/E ratio of 22 is below the five-year average of 28, allowing potential shareholders to buy at a discount. As investors recognize that rising prices are unlikely to derail McDonald’s, they will likely have a more bullish view of the stock.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. Will Healy has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Amazon, Mastercard and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

These 3 Dow Stocks Are Expected to Soar in 2024 and Beyond was originally published by The Motley Fool

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