Dow Jones Index (DJIA)

Dow Jones Index (DJIA): List of 30 Companies

As of November 2023, the following list contains the companies that serve as the underlying components of the Dow Jones index (DJIA)

By tracking these 30 blue-chip companies – each prominent companies in their respective industries – investors can obtain insights into the performance of the stock market and U.S. economy, which is tied to the global economy, considering the rise in globalization since the date of the origination of the index.

The components of the DJIA are formally reviewed periodically by a committee, and a company can be replaced to ensure the composition of the index (and performance) reflects the current financial markets and economic landscape.

Dow Jones Structure (DJIA): Price-Weighted Index

The other prominent stock market indices, notably the S&P 500 and Nasdaq composite, are weighted by market capitalization (or “market cap”).

The market capitalization is calculated by multiplying the latest closing share price of a company by its total number of shares outstanding, which is a better approximation of relative size than share prices by themselves.

Conversely, the Dow Jones Industrial Average (DJIA) is price-weighted, meaning that the value of the DJIA is based on the average stock prices of the 30 companies tracked by the index.

Therefore, the average value of the Dow Jones index could be derived by simply adding together all the stock prices and then dividing by the total number of companies, which is 30 in total.

What is the Dow Divisor?

However, the method of computation for the Dow Jones index (DJIA) becomes less straightforward (and potentially misleading to investors) if certain corporate events that complicate the basic arithmetic are taken into consideration, such as the following:

• Mergers and Acquisitions (M&A)
• Stock Splits
• Reverse Stock Splits
• Shareholder Dividends
• Stock Buybacks

The aforementioned flaw in the Dow Jones index, which had received much criticism, is the reason for the “Dow Divisor”.

The “Dow Divisor” was formally introduced later to adjust for these complexities.

The divisor is the denominator by which the sum of the 30 share prices is divided, so the extra step is to divide the sum of all 30 share prices by the divisor.

Dow Jones (DJIA) vs. S&P 500 Index: What is the Difference?

The structure of the Dow Jones (DJIA) is on a price-weighted basis and therefore does not factor in market capitalization like other indices, which is one of the drawbacks that receives scrutiny.

While the Dow Divisor normalizes against corporate actions that could skew the index price, the calculation is still prone to placing “more weight” on the highest-priced stocks.

In effect, the share price movement of companies with higher stock prices has a greater impact on the index than those with lower prices – even if the total market capitalization of the companies is comparable.

Another shortcoming of the Dow Jones (DJIA) is its limited scope as the index is only composed of 30 stocks, significantly lower than other indices:

• S&P 500 Index → Tracks ~500 Large-Cap Companies
• Nasdaq Index → All Stocks Listed on Nasdaq Stock Exchange (~2,500 Companies)
• Nasdaq-100 → ~100 Non-Financial Large, Cap Companies

The S&P 500 and the Nasdaq are also more concentrated around technology stocks relative to the Dow Jones (DJIA) – which, in comparison, has far less exposure to the tech sector.

For instance, companies such as Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), and Meta (NASDAQ: FB) are excluded from the Dow Jones Index, yet comprise major components of rival indices.

The DJIA is often criticized for under-weighting the technology sector while placing too much weight on cyclical sectors such as financial institutions (e.g. J.P. Morgan) and industrials (e.g. 3M, Caterpillar).

In spite of the aforementioned shortcomings, the Dow Jones index (DJIA) still remains one of the most frequently tracked stock market indices among market participants and equity analysts.

What is the Dow Jones Index at Today?

The Dow Jones (DJIA) index now tracks the performance of 30 companies in real-time, with a more diverse distribution of industries represented.

• Dow Jones Industrial Average Performance Chart (Source: Google Finance)

Combined, the index helps investors grasp the prevailing stock pricing trends and general market performance, with the index readily available on sites such as the following financial resources:

• Bloomberg
• Wall Street Journal
• CNBC
• S&P Global

From any of the resources listed above (and more financial sites online), one can easily check the performance of the Dow Jones (DJIA) index on any given trading day.

^{DJIA 2023 Year-to-Date Performance (Source: Bloomberg)}