The Dow Jones Industrial Average (DJIA) is the most well-known stock market barometer in the world. Since its inception in May 1896, the index has changed its components dozens of times. The first change occurred a mere three months after the index was founded. One of the most recent changes took place in June 2018, when Walgreens Boots Alliance (WBA) replaced the General Electric (GE).
On August 24, 2020, Salesforce, Amgen and Honeywell were added to the Dow, replacing Exxon-Mobil, Pfizer and Raytheon Technologies.
The Dow is meant for “blue-chip” companies that broadly represent the U.S. economy, and has historically included some of the biggest and most influential companies in the world. The company that owns the index, S&P Dow Jones Indices, looks to make changes when a DJIA company begins to experience financial distress, such as when AIG was replaced in 2008. Changes might also be made when a broader economic shift occurs and needs to be better represented, as in 1997, when four of the companies were changed.
Key Takeaways
- Some of the most iconic companies in U.S. history have been removed from the Dow Jones Industrial Average. They include General Electric, AT&T, Sears, and General Motors.
- After GE’s removal in 2018, none of the original components of the DJIA remained listed on the index.
GE isn’t the only famous name to be dropped from the Dow. Other U.S. household names have gotten the boot over the decades. And more are sure to face the same fate in the future. None of the original companies on the index remain.
Bethlehem Steel
Bethlehem Steel offers a great example of how economic changes over the decades can lead to changes in the DJIA. Bethlehem Steel was at one time the second-largest U.S. producer of steel. By the 1970s, cheaper imported foreign steel was beginning to take its toll on Bethlehem’s top-line revenue. By the 1980s, the company began shutting down some of its operations to cut costs in an effort to remain profitable.
Due to its declining business, Bethlehem Steel was removed from the Dow in 1997 after a seven-decade run. The company declared bankruptcy in 2001, and its remaining assets were sold off in 2003. Those assets exist today as part of ArcelorMittal (MT).
General Electric
General Electric was one of the original Dow stocks when the index was created in 1896. However, GE has had a volatile history with the DJIA. It was removed from the Dow twice in the index’s early days and was removed again in 2018.
GE was dropped from the index in 1898, before it rejoined the Dow the following year in 1899. After getting dropped again in 1901, it returned to the Dow in 1907, where it was a mainstay for more than a century.
There are a number of current Dow stocks who were also dropped at one point in time only to return later. IBM (IBM) joined the DJIA in 1932, but it was absent from 1939 to 1979 before returning for good. Coca-Cola (KO) also joined the DJIA in 1932, but it was not part of the index from 1935 to 1987. AT&T was removed from the Dow in 1928, 2004 and again in 2015.
Citigroup
The Travelers Companies joined the DJIA in 1997 as part of the biggest single update to the index, when four of the 30 components were changed. In 1998, Travelers merged with Citicorp, and the new combined entity named Citigroup (C) inherited Travelers’ spot in the Dow.
Citigroup was subsequently removed from the Dow following the 2008 financial crisis, when the company’s market cap shrank by over 90%, and it teetered on the brink of bankruptcy. Travelers (TRV) was spun off from Citigroup in 2002 and went on to replace Citigroup in the Dow in 2009.
Sears
For decades, Sears Roebuck Co., which joined the Dow in 1924, was a household name across America, and an enormous force in U.S. business and consumer culture. Its headquarters in downtown Chicago was the world’s tallest building for a quarter century. Sears was eclipsed as the nation’s the largest retailer by Wal-Mart (WMT) at the end of the 1980s. About a decade later, in 1999, Sears was removed from the DJIA following a 75-year run.