The bigwigs like to pick stocks that will give them a good reputation through good performance — and we can use that information to inform our own stock picks. I used the CNBC Stock Picker Tracker from Quiverquant.com to help help find Dow Jones stocks these people recommended. In fact, four of the six Dow Jones stocks (the first four on our list) are from this bigwigs list.
Most of these large-capitalization stocks pay dividends. This helps make them more stable in the long run. Most of these companies are also likely to regularly make enough free cash flow (FCF) to cover their dividends. That also helps make them attractive to all sorts of investors.
Let’s dive in and look at these stocks.
| DIS | Disney | $109.32 |
| WMT | Walmart | $128.48 |
| PG | Procter & Gamble | $148.72 |
| MSFT | Microsoft | $273.24 |
| JPM | JP Morgan Chase | $131.27 |
| MCD | McDonald’s | $251.87 |
Disney (DIS)
Market Cap: $199 billion
Disney (NYSE:DIS) grew first-quarter revenue by 23% year-over-year (YoY) and for the six months, it was up 29%. This was driven largely by the huge growth in its Parks division as people returned to Disneyland, Disney World and other recreation parks.
Moreover, free cash flow (FCF) was positive at $686 million for the quarter, although for the six months it was still negative. Disney does not pay a dividend nor buy back its stock. But its valuation is now reasonable at just 28 times for the year to end Sept. 30, and just 20 for forecast earnings ending September 2023.
If the U.S. is able to avoid a severe recession, this stock is likely to make a major rebound. For example, Morningstar indicates that the average forward price-earnings ratio over the last five years is 37 times earnings. This is much higher than the 20x forecast for September 2023.
Walmart (WMT)
Market Cap: $354 billion
Walmart (NYSE:WMT) produced modest revenue growth in Q1 of 2.4%. However, operating income and FCF turned negative, which reflects that the economy is facing rough times now. This margin pressure led to a decline in WMT stock, making it look cheap now.
Nevertheless, Walmart still pays a dividend to its shareholders. WMT stock has a 1.7% dividend yield, which helps shareholders wait for its value to emerge.
In addition, WMT stock now trades at 20 times 2022 forecast earnings and just 18 times 2023 earnings forecasts, according to Seeking Alpha.
Morningstar reports that the average forward P/E multiple is 21.9 times. So this makes WMT stock look cheap now.
Procter & Gamble (PG)
Market Cap: $357 billion
Procter & Gamble (NYSE:PG) produced 7% higher revenue on a YoY basis during Q1. In fact, what the company calls “organic” sales were up 10% YoY. More importantly, this beauty and grooming brand name company made 5% earnings before taxes (operating income) for the quarter and 6% higher earnings per share (EPS).
Moreover, P&G actually raised its outlook for 2022 in its Q1 earnings report. Prior to this, it was expecting 3% to 4% revenue growth for 2022. Now it says it forecasts 4% to 5% revenue growth. It also says EPS will grow by 6% to 9%. This does not sound like the company is looking at recession headwinds, at least right now.
Therefore, the company’s present multiple of 25 times for 2022, and 24 times for 2023 looks very reasonable. This looks to be a good investment, as long as the U.S. economy does not fall into a deep recession.
Microsoft (MSFT)
Market Cap: $2 trillion
Microsoft (NASDAQ:MSFT) generated fantastic results for Q1, with revenue up 18% and earnings up 14% on a non-GAAP diluted EPS basis. Very few companies its size were able to produce such stellar earnings.
Moreover, analysts now expect to see EPS at $9.42 per share for the year ending June 30, 2022, up 17% from last year’s $8.05. However, earnings for June 2023 are forecast at $10.75 which represents 14.1% growth in the next year.
This good growth does not cost that much given that MSFT stock trades for just 25 times earnings for June 2023 and has a 0.9% dividend yield, according to Seeking Alpha. This makes it one of the best Dow Jones stocks to invest in.
JPMorgan Chase (JPM)
Market Cap: $386 billion
JPMorgan Chase & Co. (NYSE:JPM) is one of the cheapest big-bank stocks that has a good earnings outlook. For example, JPMorgan reported lower earnings in Q1 2022 than in Q1 2021. However, its earnings were still positive. Moreover, it made a decent return on its capital.
For example, its return on tangible equity was 16%. This was down from the 29% it made last year, but that was a superior number. The reason why this makes JPM stock a good deal is because the stock price has already adjusted lower.
For example, JPM stock now trades on a forward P/E of 11.5 times 2022 earnings forecasts of $11.38 for 2022, and just 10.2 times its 2023 forecast of $12.85 EPS.
Moreover, the stock has a decent yield of 3.05% at $131.27 per share with its $4 annual dividend rate. In addition, JPM has a strong buyback program, including a new $30 billion repurchase goal (8% of its market cap) starting in May 2022. Both of these factors give investors plenty of yield (dividend and buyback yield) to enjoy while they wait for the stock to move to a higher P/E multiple or higher earnings growth.
McDonald’s (MCD)
Market Cap: $186 billion
McDonald’s (NYSE:MCD) reported on April 28 that its Q1 global comparable sales rose 12%. However, its operating income rose just 1%. This lower growth was the result of inflation costs and the effect of the closing of the Russian and Ukrainian stores. Since then, the company has decided to completely shutter those stores, which could affect the Q2 results as well
Analysts now see McDonald’s making $9.86 per share this year and $10.72 in 2023, putting the stock on a forward P/E of 25.6x and 23.5x respectively. This is slightly below the Morningstar forward P/E estimate over the last five years of 24.76x. That implies that MCD stock is still cheap here.
Moreover, given the 2.2% dividend yield, investors are getting paid to wait for the intrinsic value of MCD stock to rise. This makes it one of the better Dow Jones stocks to own right now.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.