For over 125 years, the iconic Dow Jones Industrial Average (DJINDICES: ^ DJI) served as Wall Street’s health barometer. While far from perfect, the Dow Jones is made up of 30 proven multinational companies with a long history of enriching their shareholders.
As we move into the hot summer days of August, three Dow Jones stocks stand out as particularly attractive. If you’ve got some cash on hand and are looking for an efficient way to put that money to work for the long haul, the following trio of Dow Components may be the answer.
Perhaps the most interesting stock in the Dow Jones is its fastest growing component, the cloud-based customer relationship management (CRM) software provider. Salesforce.com (NYSE: CRM).
Simply put, CRM software is designed to help businesses that deal with consumers manage their customers’ information. Businesses use CRM software to record and access real-time customer information, manage online marketing campaigns, monitor service issues, analyze relationships, and provide predictive analytics that can determine which customers would be most likely to return. ” buy a new product or service. As more industries embrace the CRM trend, we’re likely to see sustained double-digit sales growth through the mid-decade, if not much longer.
Salesforce is establishing itself as the most dominant global CRM player. When IDC looked at global CRM spending in the first half of 2020, it found that Salesforce had swallowed only a hair of 20% of global CRM revenue. The next four competitors – Oracle, SAP, Adobe, and Microsoft – don’t even add to Salesforce’s CRM share on a combined basis. As the go-to benchmark for CRM, Salesforce revenue has grown at a compound annual rate of 29% over the past decade and 51% over the past 20 years.
While Salesforce does a great job of organic expansion, CEO Marc Benioff hasn’t shied away from making acquisitions to expand the reach of the business. The purchase of MuleSoft and Tableau has worked wonderfully for the business, and I anticipate that the recently completed buyout of cloud-based business communications platform Slack Technologies will bring similar accretive growth opportunities over time. term. In particular, Slack’s communication platform can be used as a cross-selling tool for Salesforce to reach new small and medium businesses.
In closing, Benioff is sticking to his forecast that Salesforce will reach at least $ 50 billion in annual sales by fiscal 2026, up from $ 21.3 billion in fiscal 2021. If l company can maintain this annual growth rate of more than 20%, its current share price is absolute theft.
Another Dow stock that investors can buy with confidence in August is the payment processing giant Visa (NYSE: V).
Last week, investors couldn’t crush the sell button fast enough on payment facilitators after the fintech action Square (NYSE: SQ) announced that it will acquire the Australian company After payment in a stock transaction with an initial value of $ 29 billion. The giant’s buy buy now, pay later is an effort by Square to create a cohesive payments ecosystem that connects its exceptionally fast-growing digital payment platform Cash App to its core seller ecosystem. In other words, Wall Street instantly feared that other payment processors, including Visa, would be knocked out.
But if we’ve learned anything over the years, it’s that a decline in the Visa share price is a buying opportunity. While it is clear that Square is attempting to expand its brand globally, Visa’s total dominance nationally and growing global presence makes it unlikely that it will lose its headquarters in leading payments soon.
For example, Visa controlled a 53% share of the purchasing volume of the US credit card network in 2018. Its closest competitor was behind it by more than 30 percentage points. The United States is the world’s largest consumer market, putting Visa in the driver’s seat to take advantage of disproportionately long periods of economic expansion.
Visa also has an exceptionally long and sustainable growth track. It may rely on acquisitions (for example, the buyout of Visa Europe in 2016), if necessary, to expand its reach, or it could simply push its infrastructure into underbanked markets. With most of the world’s transactions still being done in cash, Visa’s long-term opportunities are likely greater than you might think.
Don’t worry, value stock investors and looking for income, I haven’t forgotten you. The third and last Dow stock to buy hand in hand in August is arguably the least volatile Dow component, Verizon Communications (NYSE: VZ).
Verizon has absolutely no chance of matching Salesforce and Visa in the growth department. However, the predictability of its cash flow, the clarity of its two main catalysts and its first dividend make it a stock to own.
Without a doubt, the biggest catalyst for Verizon is the deployment of 5G wireless infrastructure. It’s been a decade since wireless download speeds have improved dramatically, which means 5G offers consumers and businesses the ability to upgrade their devices to take advantage of those faster speeds. This cycle of technology upgrade will not happen overnight, which will provide Verizon with a multi-year opportunity to sustainably drive its wireless organic growth. Remember, wireless data is Verizon’s juiciest headroom. If customers consume more data, it’s likely that Verizon’s wireless operating margins will increase.
The second catalyst for Verizon is its continued push into broadband. The company opened its wallet to buy mid-range 5G spectrum earlier this year. The goal here is to have broadband services in 30 million homes by the end of 2023.
And who can ignore Verizon’s best-in-class 4.5% dividend yield? This payout is rock solid – an estimated 49% payout ratio in 2021 – and can help income-seeking investors offset rapidly rising inflation in the near term.
Paying less than 11 times the projected earnings per share for Verizon and compensating 4.5% per year for your patience is a discount for such a solid company.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! 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.Source link