Sarah Travers
The Dow Jones Industrial Average, a key barometer of the U.S. economy, continues to reach new milestones. Yet, certain stocks within this index remain undervalued, offering promising opportunities for forward-thinking investors. Verizon Communications and Walt Disney stand out as two Dow components with significant upside potential, positioning them for strong performance by 2025.
Verizon Communications: Riding the Wave of 5G Innovation and Income Stability
After weathering a challenging 2022, Verizon Communications is making strides toward recovery, presenting a compelling opportunity for investors. Despite market volatility, the company’s recent financial performance has shown consistent improvement, with its stock currently trading at an attractive valuation.
Verizon’s appeal lies in its robust dividend policy, distributing 59% of adjusted earnings to shareholders. This strategy has resulted in a forward yield of 6.28%, attracting income-focused investors. Additionally, the recent reduction in interest rates by the Federal Reserve has alleviated concerns surrounding high-yield investments, bolstering Verizon’s stability.
The company’s core wireless business remains a major growth driver. By the close of 2023, Verizon reported 94 million postpaid connections, reflecting its steady market presence. Its wireless service revenue rose by 3.5% year-over-year, reaching $19.8 billion in the second quarter of 2023, highlighting strong customer engagement.
Verizon is also expanding in the broadband sector, gaining 391,000 new customers in the latest quarter alone. As 5G technology becomes more widespread, the demand for faster wireless services is expected to surge. With AI-enabled smartphones like the latest iPhone driving consumer interest, Verizon is well-positioned to capitalize on this shift by offering competitive service plans.
With solid financial fundamentals and an expanding customer base, Verizon is primed for substantial growth, making it a compelling pick for 2025.
Walt Disney: A Comeback Story with Strategic Shifts and New Growth Engines
Walt Disney, a titan in the entertainment industry, has encountered significant setbacks in recent years. Challenges such as underwhelming Disney+ subscriber growth and profitability concerns have weighed on the stock. However, with strategic adjustments and renewed leadership under CEO Bob Iger, Disney is poised for a revival.
The company’s recent earnings report reflects positive momentum, with earnings per share (EPS) hitting $1.43—a marked improvement from last year’s $0.25 loss. This turnaround is indicative of Disney’s focus on profitability, a shift from its previous strategy of heavy content spending for its direct-to-consumer (DTC) streaming services.
One key initiative involves tightening policies around password sharing, following Netflix’s model. This change, set to take effect in the fall, aims to boost subscriber numbers by ensuring that viewers have their own memberships. Netflix’s success in curbing account sharing has demonstrated the potential financial benefits of this approach, making Disney’s strategy a promising one.
Currently, Disney shares are trading below $100, with a forward P/E ratio of 18, signaling the stock remains undervalued. Analysts project a 14% annual earnings growth rate, suggesting that the company could double its value over the next five years.
Verizon and Disney: Positioned for Long-Term Success
As 2025 approaches, both Verizon Communications and Walt Disney present attractive opportunities for investors. Verizon’s focus on expanding 5G services and maintaining high dividend yields provides a solid foundation for future growth.
Simultaneously, Disney’s strategic reforms in streaming, coupled with improved profitability, offer significant upside potential. For those seeking strong investments within the Dow Jones, these two stocks stand out as excellent choices for growth in the coming years.
