5 Fascinating Facts About the Dow Jones Industrial Average
The Dow Jones Industrial Average is America's most-watched index. It's also one of the oldest stock market indices in the world. Since its creation, the Dow has attempted to track the American industrial economy, and that has meant many changes as the economy itself has changed. You might be surprised to find out just how much history there is in the Dow, especially when you dig down to study the 30 venerable companies on its roster. Let's look at some of the interesting facts and fun figures about the Dow's composition, and its components.
1. More than 120 companies have been Dow components
The Dow Jones Industrial Average has made nearly 50 changes to its membership since Charles Dow first established the index in 1896. Over the years, these components have ranged from commodity trusts to modern megabanks, and the Dow has swapped out so many stocks that roughly 120 companies -- give or take a handful that appear under multiple names -- can claim to have been blue-chip components at one time or another. Four companies' preferred shares have been part of the Dow as well (the last preferred share was removed when the index grew to 20 components in 1916), and two companies -- U.S. Steel and U.S. Leather -- were once considered so important to the American industrial economy that both their common and preferred shares were part of the Dow at the same time!
2. The Dow's oldest component has been on the index for over 100 years
General Electric has been part of the Dow since 1907, which is the longest tenure of any member company. The Dow only tracked 12 components at the time, and this wasn't even GE's first run on the index, since it had actually been one of the first 12 components when the Dow was first developed in 1896.
GE got the boot a mere two years later in favor of U.S. Rubber, but it rejoined in 1899 for another two years before dropping off again in 1901. Its second replacement was a bit more memorable -- U.S. Steel became a Dow component in 1901, shortly after it was created in what was at the time the largest merger in business history. U.S. Steel was also directly responsible for GE's third and final addition to the Dow in 1907, as it bought out fellow Dow component Tennessee Coal, Iron and Railroad at fire-sale prices to help stem the Panic of 1907.
3. The Dow's oldest component isn't its oldest company
GE was created in 1892, but the oldest company on the Dow is nearly a century older. DuPont was founded as "E.I. du Pont de Nemours" by Parisian chemist Eluthere Irenee du Pont de Nemours on the banks of Delaware's Brandywine River in 1802. DuPont quickly became one of the young nation's leading gunpowder suppliers, and its dominance of this early defense-contracting industry led to antitrust efforts a century later.
DuPont, like GE, became a Dow component more than once. Its first tenure on the index lasted only one year, from 1924 until 1925. Its second chance on the Dow has been more durable, as DuPont has been an index component without interruption since 1935.
DuPont might be the oldest company on the Dow, but it doesn't have the deepest roots. Merck traces its origin to Germany, where Friedrich Jacob Merck established a pharmacy business under the family name in 1668. The original German Merck, like its American offshoot, is now a multibillion-dollar international pharmaceutical company, but it's only a fraction of our Dow component's size.
4. The Dow's youngest company is only 30 years old
Make that 29 -- Cisco was founded in December 1984, so it won't officially turn 30 until the end of this year. Cisco's rise has been one of the most rapid in history, and not just among Dow components. The company passed $1 billion in market cap less than two years after it went public in 1990, and within a decade of its IPO Cisco briefly became the most valuable company in the world.
Cisco is the last Dow component to be added from the tech world (so far), and it's currently the only Dow component to directly represent the rise of the Internet, as its routers and switches help direct much of the world's online traffic.
5. The average Dow component is 111 years old!
The Dow's 30 components are, on average, much older than their S&P 500 counterparts, thanks to long corporate histories that can easily be traced back through more than a century. The average age of an S&P 500 company has plummeted from 75 years in the 1930s to just 15 years today, thanks to a flurry of rapid growth made possible by new technologies.
Many "modern" Dow components that claim founding dates in the past 30 years are in fact much older. Both ExxonMobil and Chevron trace their origins to John D. Rockefeller's Standard Oil, which was founded in 1870, while AT&T and Verizon are the largest divested parts of the original American Telephone and Telegraph Co. which was created by telephone pioneer Alexander Graham Bell's American Bell in 1885. The financial sector is the oldest in the Dow, as the average age of its six representatives is 130 years, and this average is skewed by UnitedHealth's 1977 founding -- JPMorgan Chase , for example, traces its lineage to the end of the 18th century, as the Chase half of this megabank merged with the Bank of Manhattan, which was established by Aaron Burr in 1799.
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The article 5 Fascinating Facts About the Dow Jones Industrial Average originally appeared on Fool.com.Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology. The Motley Fool recommends Chevron, Cisco Systems, and UnitedHealth Group. The Motley Fool owns shares of General Electric Company and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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