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AT&T Bumped from Dow in Favor of Apple

Published by: Kelly Curtis on 6th Mar 2015 | View all blogs by Kelly Curtis

 

AT&T Bumped from Dow in Favor of Apple

 

 

Apple was accepted into an elite club on Friday when it was announced the tech giant will replace AT&T on the Dow Jones industrial average.  The change is scheduled to take place on March 19th, and is not expected to affect the overall value of the 30-stock index.  S&P Dow Jones Indices, which manages the Dow, said the move is in response to a planned stock split by VISA.  The scheduled four-to-one split will reduce VISA's stock price by 75 percent, thus reducing the weight of the information technology sector on the index.  Bringing in Apple, the index manager said, will help offset the loss of value caused by VISA's stock split.

 

Over the years, AT&T has had a rocky relationship with the Dow Jones index.  The company was first listed on the Dow in 1916, when it had just 20 stocks, then was removed in 2004.  The company was only out for a year, however, as a merger with SBC Communications convinced managers to bring them back.  This latest dismissal comes at a difficult time for the telecom giant, as its facing major pricing pressure from smaller rivals in a highly competitive environment where most consumers already have cellphones.  AT&T's stock price has only gained 3.6 percent over the past year, compared to an 11 percent rise in the S&P 500 over that same time frame.  The company replacing AT&T on the Dow, meanwhile, has seen its shares soar 68 percent in the past 12 months.

 

 

Started in 1896, the Dow is one of the oldest measures of stock prices in the entire world.  Unlike the S&P 500, which tracks 500 different stocks, the Dow Jones includes only 30 different companies.  These 30 firms are carefully selected, Dow managers said, to be representative of the entire stock market.  While the S&P 500 is monitored more closely by professional investors, the Dow is still viewed as a viable gauge of market conditions.  Despite being based on a much smaller sampling of stocks, the performance of the Dow has generally been in line with the performance of the larger S&P.  Over the past year, for example, the Dow has gained 9.2 percent, narrowly missing the 10.8 percent jump in the S&P.   The last major shake-up of Dow components came in September 2013, when Alcoa, Bank of America and Hewlett-Packard were dismissed in favor of Goldman Sachs, Visa, and Nike.

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