This may be your best chance to find Dow stocks to buy on the dip, although that might not seem intuitive given the current market climate.
Still, if you have a long time horizon and a reasonable risk outlook, this may be the time to not only stay in equities but to make opportunistic buys. Historically, the market has an upward bias, but the market doesn’t announce when it hits a bottom.
The Dow is seen as a barometer for the broader economy, and since every component of the index pays a dividend, owning one or more of the Dow stocks can help smooth out the current market volatility.
Furthermore, some of these Dow stocks to buy on the dip are beginning to reach more attractive valuations which means they will likely have significant upside when the market does reverse course.
Apple (AAPL)
When many investors consider Apple (NASDAQ:AAPL) it’s due to its iconic iPhone. Not only does the iPhone command a significant market share, but it also carries a loyal following.
Apple continues to expand its ecosystem with devices like the Apple Watch. This fits the definition of stocks that investors should be considering. That is, companies that make products that will continue to be in high demand.
A growing portion of its revenue, however, is coming from its Services business. In fact, this area of the business accounts for approximately $20 billion a quarter. In the trailing 12 months that means between 16% and 25% of the company’s revenue came from this division.
The company recently announced it will be increasing the price for apps and in-app purchases on its App Store beginning in October for all of the eurozone plus several countries in South America and Asia.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is one of the perennial Dow stocks to buy on the dip. And my overall thesis for Microsoft is similar to that of Apple. The pandemic showed that Microsoft has a role to play in many of the high growth areas of our economy – particular in the area of cloud computing. Anytime a company can say it’s a worthy competitor to Amazon (NASDAQ:AMZN) in any area it’s impressive. And as my colleague Bret Kenwell noted Azure has been a huge part of the company’s success.
The company’s current P/E ratio of around 26x earnings puts the stock at a premium to the S&P 500. However, as the saying goes, it’s not bragging if you can back it up. And the company is projected to show double digit growth in both revenue and earnings for the next five years.
Plus, the company has a rather attractive dividend compared to others in its sector. A dividend mind you that it just increased for the 19th consecutive year.
Chevron (CVX)
Energy stocks have been one of the best-performing sectors in 2022, but Chevron (NYSE:CVX) is the only traditional energy company that makes the list of Dow stocks.
The simple thesis for owning CVX stock is that oil prices aren’t likely to stay depressed forever. When the economy does turn around, demand for oil will lead the way. Yes, renewable energy is coming, but it’s not time to close the book on traditional fossil fuels…yet.
Plus, like many traditional oil and gas companies, Chevron is making strategic investments in renewable energy although it’s fair to note that it is not investing directly in wind and solar at this time.
In a recent Q&A session with investors, Chevron CEO Mike Wirth expressed the sentiment that the dividend remains one of the company’s primary priorities. The company’s dividend is already one of the best in the entire market. It currently pays out $5.68 on an annual basis and has increased it for the last 35 consecutive years.
Home Depot (HD)
Similar to Chevron, Home Depot (NYSE:HD) is another stock to consider as a harbinger of better days.
The housing market is slowing considerably and that is reflected in the HD stock price which is down 35% in 2022. However, lower demand doesn’t mean that demand is non-existent, and that is reflected in the company’s revenue and earnings which continue to grow on a year-over-year basis.
That being said, the need for home improvement supplies doesn’t stop once individuals move into a new home. In fact, as hurricane season reaches its peak, it’s a good reminder that the company’s products will always be in demand.
Plus, as Josh Enomoto reminds investors the heft of the company’s products has allowed it to hold off Amazon at least for now.
HD stock currently trades at about 16x earnings which puts its valuation about right with the S&P 500. And the company pays an attractive annual dividend of $7.60 per share which currently is about a 2.19% dividend yield.
McDonald’s (MCD)
During the pandemic, McDonald’s (NYSE:MCD) showed why it’s important to pay attention to what consumers do more than what they say they’re going to do. Or in the case of McDonald’s what they say they won’t do. McDonald’s is frequently dismissed as a restaurant chain that consumers would never buy food from.
Well as it turns out, the company known for its Golden Arches did brisk business during the pandemic.
Although the company’s earnings growth is not expected to continue to remain at pandemic levels, it still is projecting high single-digit earnings growth in the next couple of years.
JPMorgan Chase (JPM)
Buying quality stocks is always important. However, in times like this, it’s especially important to make sure you’re buying best-in-class stocks. That’s a reason to buy JPMorgan Chase (NYSE:JPM). It’s easy to see why the banking giant makes the list of Dow stocks.
The economy may be facing “storm clouds” if CEO Jamie Dimon is correct. But so far, it’s having little effect on the bank’s revenue and earnings which remain strong. In fact, Dimon remarked that the bank will be fine during a recession.
JPM stock is down 26% for the year, but some analysts believe that much of the bad news has been priced into bank stocks. Investors will get their first glance at how well the bank is really doing when the company reports earnings in mid-October.
Even if stock price growth remains sluggish, investors are currently getting an annualized dividend of $4.00 per share that has been increasing for 10 consecutive years.
Visa (V)
Visa (NYSE:V) is the last of the Dow stocks to buy on this list. A troubling reality that many Americans are facing is using credit cards to manage their monthly budget.
Visa makes a relatively small amount on those purchases, but that’s not to say it makes nothing. In fact, in the last four quarters, the company recorded $28 billion in revenue from the fees it charges. That was a gain of 24% over the trailing twelve months.
That growth is likely coming from the consumer’s continued commitment to travel. There’s no telling how long that will last. Still if consumers are forced to rely on credit that would bode well for Visa. Plus, consumers continue to express a preference for paying with debit cards and credit cards instead of cash. That trend is unlikely to change which bodes well for V stock.
On the date of publication, Chris Markoch had LONG positions in AAPL, CVX, and MCD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.