The Dow Jones Industrial Average tracks the performance of 30 leading companies. The index recently rose to new highs, but some of its constituent companies have not yet recovered from the 2022 bear market and are trading at rock-bottom prices that could potentially fuel a sharp recovery in the coming year. Here are two timely purchases at the moment.
1. Verizon Communications
Shares of Verizon Communications (NYSE: VZ) are starting to recover after plunging during the 2022 market sell-off. The company has reported strong financial results this year, but the stock’s high dividend yield suggests it is undervalued ahead of opportunities to capitalize in 5G wireless systems and the demand for artificial intelligence (AI) devices.
Verizon is a dividend investor’s dream. The company is paying out 59% of its adjusted earnings, bringing its forward yield to 6.28%. High-yield stocks can be sensitive to rising interest rates, but with the Federal Reserve recently announcing a half-point rate cut, some of the downward pressure on top dividend stocks is being removed.
Verizon has been paying a growing dividend for years, which comes from consistent revenues and profits the company earns by charging customers for wireless plans every month. It ended 2023 with 94 million postpaid connections, which refers to billed monthly subscriptions that customers sign up for. Verizon’s wireless revenue accelerated in the second quarter, rising 3.5% year over year to $19.8 billion. The company also says it has gained market share in broadband services, with 391,000 net new customers in the last quarter, which is higher than the net customer numbers in the first quarter.
Investors are increasingly optimistic about Verizon’s ability to maintain growth as customers upgrade to 5G wireless plans. Customers may have a strong incentive to upgrade Apple launches AI-optimized iPhones. Wall Street’s long-term earnings expectations are higher than a year ago. The company’s high returns and solid financial results could propel Verizon stock higher in 2025.
2. Walt Disney
Walt Disney (NYSE: DIS) is a timeless brand with some of the most valuable entertainment properties in the industry. Past management mistakes present long-term investors with a once-in-a-decade buying opportunity. The stock has fallen deeply out of favor on Wall Street in recent years, due to lower-than-expected Disney+ subscriber growth and weak profitability.
With CEO Bob Iger back at the helm, Disney’s finances are now in much better shape. The company’s revenue is growing, and most importantly, Disney is the driving force profitable grow. In the most recent quarter ended in June, earnings per share improved to $1.43, erasing a loss of $0.25 a year ago.
Disney’s investments to support content production for the direct-to-consumer (DTC) segment, including streaming services, nearly wiped out the company’s net revenue a few years ago. But the DTC segment is now profitable a quarter earlier than management’s original target.
A key catalyst that could send shares higher next year is the surge in Disney+ subscribers. Similar to NetflixDisney is beginning to put an end to unauthorized password sharing and requiring all viewers to pay for a membership. The company expects the password sharing initiative to launch this fall. Netflix’s revenue and subscriber base benefited greatly from this effort, and the same could happen for Disney.
Despite marked improvements in the sector, the stock is still trading at less than $100 and has a forward price-to-earnings ratio of 18 based on fiscal 2025 earnings expectations. Analysts predict long-term earnings growth of 14%. If it meets these expectations, Disney stock could double in value within the next five years.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, you would have $21,049!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $43,847!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $378,583!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 14, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Apple, Netflix and Walt Disney. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
These two Dow stocks will rise in 2025 and beyond, originally published by The Motley Fool
