What GE's stock being replaced by Walgreens in the Dow Jones Industrial Average may mean

Walgreens shares enters the Dow on June 26.

  • By Mark DeCambre,
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General Electric (GE) is being replaced by Walgreens Boots Alliance Inc. (WBA) as one of the 30 components of the 122-year-old Dow Jones Industrial Average (.DJI).

The change brings an end to the tenure of the oldest and only remaining original component of the blue-chip focused Dow, and caps a decisive downtrend for embattled GE. But the planned move also has consequences for the price-weighted Dow average which has become one of the most closely watched equity benchmarks since its creation in 1896, then-comprised of just 12 components.

For one, the addition of Walgreens Boots Alliance adds shares of a fourth company to the consumer-staples category, representing businesses that sell staples like cereal, toothpaste and razors, among other household goods. Presently, the blue-chip benchmark’s consumer-staples group comprises Walmart Inc. (WMT), Procter & Gamble Co. (PG), and Coca-Cola Co. (KO).

Secondly, the change marks the Dow’s first alteration since September, following the consummation of the merger between Dow Chemical Co. and then-Dow component DuPont & Co., creating the entity DowDuPont Inc. (DWDP).

Most important, the addition of Walgreens stock means that the so-called divisor of the Dow will change.

The so-called divisor, or in this case multiplier, is the figure used to determine the influence of any of the 30 components that make up the benchmark.

The Dow isn’t exactly an average of its components, as its name might imply; instead, the value of the Dow is determined by calculating the sum of the share price of its members using a divisor. Presently, that divisor stands at 0.145233969. That means any $1 move in any one of the Dow’s components equates to a 6.89-point swing in the average. The divisor will be changed just before the Dow’s opening on June 26.

Here’s when some past divisor changes have occurred:

  • Jan 1, 2002: 0.144521
  • June 3, 2002: 0.14445222
  • Aug. 21, 2002: 0.14418073
  • Nov. 19, 2002: 0.14585278
  • Feb. 18, 2003: 0.14279922
  • Aug. 20, 2003: 0.14249417
  • Sept. 30, 2003: 0.13500289
  • April 8, 2004: 0.14090166
  • June 6, 2004: 0.13561241
  • Nov. 15, 2004: 0.13532775
  • June 13, 2005: 0.13033708
  • July 14, 2005: 0.12560864
  • Oct. 3, 2005: 0.12493117
  • Nov. 20, 2006: 0.12482483
  • April 2, 2007: 0.123051408
  • June 13, 2007: 0.123017848
  • Feb. 19, 2008: 0.122834016
  • April 1, 2008: 0.122820114
  • Sept. 22, 2008: 0.125552709
  • June 8, 2009: 0.132319125
  • July 2, 2010: 0.132129493
  • Aug. 13, 2012: 0.12914682
  • Sept. 24, 2012: 0.130216081
  • Sept. 23, 2013: 0.155715905
  • March 19, 2015: 0.14985889
  • July 1, 2015: 0.149677273
  • Dec. 24, 2015: 0.146021281
  • Sept. 1, 2017: 0.145233969

According to WSJ Market Data Group, Walgreens’ shares would rank them as the seventh-least-influential within in the Dow, based on closing levels as of June 19 (see table below).


Ticker Name Closing Price
GE (to be removed June 26) General Electric Co $12.95
PFE Pfizer Inc. $36.22
KO Coca-Cola Co. $43.60
CSCO Cisco Systems Inc. $43.82
VZ Verizon Communications Inc. $48.50
INTC Intel Corp. $52.93
MRK Merck & Co., Inc. $61.03
WBA Walgreens Boots Alliance Inc. $64.61

Source: MarketWatch


Moreover, the consumer-staples names have exacted a 227-point year-to-date toll on the Dow, after adding some 287 points to blue chips in 2018 (see table below).


Company YTD contribution to the Dow 2017 contribution to the Dow
Coca-Cola -15.70 30.28
P&G -107.07 53.40
Walmart -104.25 203.68
Total -227.01 287.37

Source: MarketWatch


Consumer staples have mostly underperformed this year because that sector has struggled to pass on rising costs to customers and are contending with the rise of Amazon.com Inc. (AMZN), which has made exerting pricing power on companies that make household goods challenging.

Consumer staples, as measured by the exchange-traded Consumer Staples Select Sector SPDR ETF (XLP), are down 10.3% so far this year and off about 9.2% over the past 12 months, according to FactSet data.

Still, the performance of Walgreens, particularly as funds that track the Dow are compelled to buy shares of the company to reflect the coming change, may outstrip that of embattled GE. That said, the Wall Street Journal citing the S&P Dow Jones Indices, indicates that about $29.5 billion of mutual and exchange-traded funds track the Dow, compared with the $9.9 trillion in funds linked to the S&P 500 index (.SPX), through the end of 2017.

Walgreen’s shares are down 11% year to date and off about 19% over the past year, compared with GE’s stock, which has lost 26% in the first six month of the year and 55% in the past 12 months.

Mike DeStefano and Tom Destefano contributed to this article

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