The Dow Jones Industrial Average (DJIA) announced it will drop General Electric (GE) from the index.
GE, a 126-year-old company that was at one time one of the most valuable companies in the U.S., has lost it place on the Dow Jones Industrial Average (DJIA).
The Dow will replace it with drugstore chain Walgreen Boots Alliance, a company the managers of the Dow index say represents growing aspects of the economy.
GE, founded by Thomas Edison in 1892, was one of the original members of the Dow.
Why this is a big deal
When the Dow was created in 1896, GE was the most valuable company on the index.
GE’s stock has fallen by more than half since June 2017, according to reports, and its decline over the past decade or so has culminated in the decision by S&P Dow Jones Indices, which manages the index, to give it the boot.
“General Electric was an original member of the DJIA in 1896 and a member continuously since 1907,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices said in a press release. “Since then the U.S. economy has changed: consumer, finance, healthcare, and technology companies are more prominent today and…with [Walgreens] addition, the DJIA will be more representative of the consumer and health care sectors of the U.S. economy.”
Read more: Social media company Twitter recently joined the S&P 500, replacing agricultural chemical company Monsanto.
What you need to know:
- Walgreens is replacing GE on the Dow
- GE has been a member of the Dow continuously since 1907.
- Managers of the Dow index chose to eliminate GE’s, whose share price has dropped considerably over the past 18 years–including 55% over the past calendar year.
- GE’s value peaked in 2000 with a market capitalization of almost $594 billion, making it one of the most valuable companies in America at the time.
- The index will add Walgreens as the consumer staples and health care sectors have increased in importance to the economy.
Dinosaurs go extinct
GE has struggled to stay relevant in an evolving economy. For many years, manufacturing (of several types, including electric appliances, airplane engines, and even computers) was GE’s bread and butter. But the industry has been in a tailspin, domestically, since the financial crisis in 2008.
The company’s stock was a staple in many investors’ portfolios over the years, as a blue-chip stock with dependable dividends.
Other companies that have dropped from the Dow
The Dow has evolved over the years, and GE was the last company founded in the 19th-century company listed on the index. But the Dow’s makeup has changed more than 50 times since its inception. Many other famous companies have lost their iconic status on the Dow over the years, and have been removed from the index as their businesses have suffered in one way or another.
- Sears (removed in 1999)
- Citigroup (removed in 2009)
- General Motors (removed in 2009)
- Bank of America (removed in 2013)
- AT&T (removed in 2015)
Index: A collection of stocks or bonds that takes the measure of a market.