Just as I predicted, Honeywell International‘s aerospace spinoff on June 29 was the catalyst for Alphabet to join the Dow Jones Industrial Average (^DJI +0.59%).
With Alphabet replacing Verizon Communications, Nike (NKE +1.74%) is now by far the lowest-priced Dow stock. Here’s why that matters, and why it could spell trouble for Nike’s seat in the Dow.
Image source: Getty Images.
Nike is in the same boat as Verizon
In its June 23 press release, S&P Dow Jones indexes specifically called attention to Verizon’s lower share price as the reason for its removal, stating that it made up less than one-half of one percentage point. “The Dow Jones Industrial Average is a price-weighted index, and thus, persistently lower-priced stocks have an immaterial impact on the index,” read the press release.
Nike also makes up just 0.5% of the Dow. The stock is hovering around a 12-year low. And even when factoring in dividends, Nike has given shareholders a total return (capital gains plus dividends) of just 39.6% in its time as a Dow stock.
As the chart shows, Nike outperformed the Dow until recently.
Today’s Change
(1.74%) $0.71
Current Price
$41.46
Key Data Points
Market Cap
$61B
Day’s Range
$40.78 – $41.69
52wk Range
$40.00 – $80.17
Volume
1.1M
Avg Vol
24.8M
Gross Margin
40.57%
Dividend Yield
3.93%
Nike’s turnaround has been anything but smooth
Nike’s turnaround has taken far longer than expected. The company overestimated the staying power of pandemic-driven consumer demand, which is also when Nike stock hit an all-time high. Nike aggressively shifted to a direct-to-consumer (DTC) model through Nike Direct and Nike Digital, reducing its business with wholesalers in the process. But that backfired when wholesale relationships proved more valuable than Nike had anticipated, as its DTC model wasn’t growing nearly as quickly as expected. Throw in strained consumer spending, inflationary pressures, and tariffs, and it’s easy to see why Nike has continued to tread water.
Nike has shown signs of recovery and gained momentum after its new CEO, Elliott Hill, took over in October 2024. But in Nike’s latest earnings call in March, Hill said the turnaround is taking longer than he would have liked, and that spring 2027 will be the first time Nike realizes the fruits of its reorganization efforts. However, he remains optimistic that Nike’s efforts will pay off in the long run.
Nike remains a footwear and apparel powerhouse. And to its credit, it has paid and raised its dividend for 24 consecutive years and is one of the higher-yielding Dow stocks at 4%. But even if Nike doubled, it would still be the lowest-priced stock in the Dow. And with the turnaround far from over, it wouldn’t be surprising if Nike was booted from the Dow.
However, there have been recent cases of Dow stocks that were deleted and went on to crush the stocks that replaced them. Intel has outperformed Nvidia by a wide margin since it was replaced in November 2024. Similarly, RTX has crushed Honeywell. Meanwhile, ExxonMobil has run laps around Salesforce.
So even if Nike gets removed from the Dow, patient investors who still believe in its brand power and turnaround potential may want to buy and hold the high-yield dividend stock.
The stock that could replace Nike
When S&P Dow Jones swaps out a Dow stock, it’s typically for another stock in the same sector or with industry overlap. However, that’s not always the case, as Salesforce replaced ExxonMobil. And Alphabet’s replacement of Verizon and Amazon‘s replacement of Walgreens Boots Alliance are technically sector replacements in communications and consumer discretionary, respectively, although Alphabet and Amazon are both tech powerhouses in their own right.
With Nvidia now in the Dow, I don’t think Broadcom or Micron Technology would replace Nike. Tesla has a shot, although if it merged with Space Exploration Technologies, that would complicate things.
My best guess is that if Nike is kicked from the Dow, the most logical replacement is Meta Platforms (META +2.27%). Since the Dow already has considerable exposure to consumer discretionary and consumer staples, it could make sense to replace Nike with a stock from a different sector. Meta and Alphabet overlap in that they both have massive advertising businesses. But Meta is in a league of its own with social media. And it began paying a dividend in 2024, which helps its blue-chip case if it builds on that payout.
Daniel Foelber has positions in Nike and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Honeywell International, Intel, Meta Platforms, Micron Technology, Nike, Nvidia, RTX, S&P Global, Salesforce, and Tesla. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
