In 2016, Chevron Corp. (NYSE: CVX) rose 36%, and shares ended the year at $117.70. Its current consensus price target of $119.65 implies limited upside of roughly 1.7%. Chevron has a 52-week range of $75.33 to $119.00 and a market cap of $222 billion. Its dividend yield is 3.7%.
Chevron is of course not as large as rival Exxon Mobil, but Chevron has been more favored by investors of late on many fronts. An early departure by Rex Tillerson to become Secretary of State has also created some shuffling. Regardless of which is company preferred at any snapshot in time, the Trump policies are already pointing to much more pro-oil environment than what the last eight years saw.
General Electric Co. (NYSE: GE) generated just a 4.6% total return in 2016, and it closed at $31.60 a share on the last day of the year. The 12-month consensus price target is $33.86, and the $31.60 year-end price would imply upside of 7.1%. Then there is the 3% yield to consider, for an implied total return of just over 10%, if the analysts prove to be right. GE has a 52-week range of $27.10 to $33.00 and a market cap of $281 billion.
GE is the biggest of the three Dow conglomerates by market cap, but 3M and UTC outweigh it exponentially due to share price. GE still drives the cart, and more upside is going to be required here to drive the rest of the conglomerates in 2017 and beyond.
If a 34.92% gain to close 2016 at $239.45 sounds impressive, the real kicker is that Goldman Sachs Group Inc. (NYSE: GS) shares ended 2016 over 60% higher from the post-Brexit lows in late June and early July. The consensus analyst target is calling for $234.23, actually implying a downside of 2.2% in 2017. The shares have a 52-week range of $138.20 to $245.57, and the market cap is $99 billion. The dividend yield is 1.1%.
Goldman Sachs is the King of the Dow, with more than an 8% weighting due to its $200 plus share price. It will need to show handy upside to its earnings in 2017, and investors are going to have to believe that its book value can rise even faster. It may not be a bank like JPMorgan, but this stock likely cannot have a poor performance in 2017 for the Dow to rise another 8.4%.
Ending at $134.08 a share on the last trading day in December, Home Depot Inc. (NYSE: HD) managed a total return of just 3.5% in 2016. All of that seems to have come from a rally late in the year. The consensus target price of $147.04 from Thomson Reuters is actually lower than it was 90 days earlier, but that implies price upside of 11.9%. Then the 2.1% dividend yield would make for a potential total return of 14% in 2017, if the analysts are right. Home Depot has a 52-week range of $109.62 to $139.00. The market cap is $164 billion, and its dividend yield is 2.0%.
Home Depot is perhaps the most important retailer in America right now — not because of the breadth, but because it focuses almost 100% on home-spending and is a key beneficiary of housing strength. If housing does not continue to recover, you would likely see it in Home Depot. Expectations remain that housing will be a driving force of the economy in 2017.
The dividend-adjusted return from International Business Machines Corp. (NYSE: IBM) was about 25.2% after closing at $165.99 in 2016. IBM’s consensus year-end analyst price target of $156.62 would imply that its shares actually are overvalued by 5.6% for 2017. Its 3.4% dividend yield would mitigate that implied total return in 2017 to a loss of just 2.2%, if the analysts have their ducks in a row here. Big Blue has a 52-week trading range of $116.90 to $169.95. The market cap is $158 billion.
IBM’s recovery in 2017 was long overdue. Still, its negatives remain in place as the core business erosion eats into the gains of growth initiatives. IBM could see upside from all the infrastructure orders needing outsourced IT services. A rise in IBM likely would allow other major tech stocks to get a rise in earnings multiple expansion as well. IBM may be hated by some analysts, but it almost has to participate in 2017 to signal all is well in technology. Don’t forget that Cisco, Intel, Microsoft and Apple are all tech stocks and Dow components.
Shares of Merck & Co. Inc. (NYSE: MRK) rose 15% to close 2016 at $58.87. Its consensus price target of $67.28 would imply 14.3% upside, but its 3.2% dividend yield would offer a total return opportunity of 17.5%, if the analysts have their 2017 calls accurate. The stock has a 52-week range of $47.97 to $65.46, and the market cap is $163 billion. The dividend yield is 3.1%, making it one of the 2017 Dogs of the Dow.
Merck really has been unable to get past a lot of woes. It offers a high yield but growth assumptions are meager ahead. Maybe further restructuring is needed, or maybe Merck needs a big merger to shake things up. This would also help Dow component Pfizer, and it would mean the D.C. drug price-pressure has largely abated. It just seems hard to imagine that the Dow’s rise could continue without Big Pharma participating.
Now Walt Disney Co. (NYSE: DIS) seems to be getting past the endless concerns about ESPN subscriber erosion. Expansion of the Star Wars universe is only going to further help Disney get back on track. Ditto all the other franchise films and merchandise around Marvel and others under Disney’s control. Its theme park business has been acting like it is almost recession-proof as well.
Disney managed to return just 0.67% for shareholders in 2016, with a $104.22 closing price on the last day of December. The $104.22 year-end price compared with a $108.48 consensus analyst target price, so investors could imply an expected upside of 4.1%. Then there is the 1.5% dividend yield to consider, after it was raised in 2016, for a potential total return of close to 5.6% expected in 2017. Disney shares have a 52-week range of $86.25 to $106.75, and the market cap currently is $166 billion.
In 2016, UnitedHealth Group Inc. (NYSE: UNH) generated a return of about 38% for shareholders, based on its $160.04 closing price on the last day of December. The consensus price target of $179.23 represents 12.0% upside in 2017, but the 1.5% dividend yield would take that implied total return up to 13.5%, if the analysts are correct when it comes to the largest health insurer in the United States. UnitedHealth has a 52-week range of $107.51 to $164.00 and a market cap of $153 billion. Its dividend yield is 1.5%.
UnitedHealth has already led the health care trend by exiting the exchanges, and Trump’s team is aiming to repeal and replace Obamacare. Analysts are positive on UnitedHealth being the largest health insurer in America, and it has been making smaller expansionary acquisitions that could lead to growth and better health care management trends that would be better for the whole health care spending arena in 2017 and years beyond.