The Dow Jones Industrial Average is near record highs as the stock rally that began in spring 2023 continues. Comprised of 30 leading blue-chip stocks that are representative of the U.S. economy, the index is often referred to as the “Dow 30.” While the index might be at record levels, it has reached those heights largely due to the performance of a handful of its 30 stock components.
Most companies listed on the Dow are performing poorly. In fact, despite rising 13% in 2023, the Dow’s gains trailed those of the benchmark S&P 500 index and the technology-heavy Nasdaq index. The reason that the Dow brought up the rear is that the index has very few tech stocks, and even fewer stocks focused on the red hot area of artificial intelligence (AI).
Most of the stocks in the Dow are in old economy sectors such as oil and gas, finance, and construction. While important, those sectors aren’t driving growth in equities. Here is exit now! Three Dow stocks to sell in February 2024.
UnitedHealth Group (UNH)
Utilization rate is the problem at UnitedHealth Group (NYSE:UNH). The largest healthcare insurer’s stock fell after its recent fourth-quarter 2023 earnings print because the company reported that it is spending more on medical expenses and that’s eating into profits. As with other health insurers, a higher-than-expected utilization rate of medical services by seniors enrolled in U.S. Medicare Advantage plans has become an issue for UnitedHealth. And that news has UNH stock down 4% on the year.
To be fair, UnitedHealth did manage to beat Wall Street forecasts on the top and bottom lines with its Q4 2023 financials. The company reported earnings per share (EPS) of $6.16 and revenue of $94.4 billion. That was better than the consensus forecast of $5.98 in EPS and sales of $92.1 billion. However, it’s not clear when UnitedHealth will get some relief from the higher-than-expected utilization rate for medical services, particularly among aging seniors, and that has soured investors and analysts on the stock.
Walgreens Boots Alliance (WBA)
It’s never good when a company cuts its dividend payment to stockholders. But when they reduce the dividend by nearly 50%, it’s really bad. Yet that’s what happened at the start of this year when pharmacy chain Walgreens Boots Alliance (NASDAQ:WBA) slashed its quarterly dividend payment by almost half. The company said that it is lowering its dividend payout to 25 cents per share from 48 cents previously, a reduction of 48%. That news sparked an immediate selloff in WBA stock.
The company said the dividend cut was being made to help “strengthen its long-term balance sheet.” But that explanation provided little comfort to shareholders. Walgreens’ dividend yield is now 4.48% based on the current share price. That’s down from its previous yield of more than 7%, which made Walgreens the highest-paying dividend stock in the Dow 30. It also marked the company’s first dividend cut in nearly 50 years. Year-to-date, WBA stock is down 16%, bringing its loss over the last 12 months to nearly 40%.
Nike (NKE)
Despite best efforts, sneaker giant Nike (NYSE:NKE) just can’t seem to get its house in order. The company continues to report a series of disappointing earnings that have kept investors far away from its stock. In 2024, Nike’s share price is flat. However, NKE stock has declined 16% over the past 12 months and is nearly 40% below the all-time high reached in November 2021. The company’s persistent troubles and poor share price performance make Nike a Dow stock to sell in February.
Just before Christmas, NKE stock fell 12% after the company reported mixed financial results and lowered its sales outlook. Nike reported EPS of $1.03 versus 85 cents that had been expected on Wall Street. Revenue totaled $13.39 billion compared to $13.43 billion that was forecast among analysts. Looking ahead, Nike said that it expects full-year revenue to grow only 1%, compared to a prior outlook of about 5% growth.
The company’s latest plan is to cut costs by $2 billion over three years, mostly through staff layoffs. But it remains to be seen how much that will help. More recently, Nike announced that it was ending its long-term sponsorship of golfer Tiger Woods, adding to the glum sentiment surrounding the stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions 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.
