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The Dow Jones Industrial Average includes multiple companies that stand out as a strong fit for investors looking toward brand leadership and dividend payouts. Three companies, in particular, that offer forward-looking earnings growth include the world’s manufacturing leader in construction and mining equipment, Caterpillar (NYSE:CAT);  Walt Disney (NYSE:DIS), the leading media industry giant; and Nike (NYSE:NKE), the global leader in athletic shoes, apparel, and equipment.

All three Dow stocks are poised to benefit from changing economic factors in the coming year that portend further stock price growth. Let’s take a closer look.

Image source: Caterpillar.

1. This Caterpillar is ready to fly

During the past year, as the DJIA gained about 19%, Caterpillar stock gained about 13.4%. Part of the reason for the lower growth rate is simply that in the past six months, investors have been taking profits. From mid-March 2020 to May 2021, the stock price skyrocketed over 107%, supported by signs of a post-pandemic rebound and improved outlook. Since hitting those 52-week highs in May, Caterpillar stock has dropped about 16.3%.

Because construction equipment sales are typically related to a rise in residential construction, November construction starts should give investors confidence. November starts rose at a rate 8% higher than what we saw in the same month last year, making it the second-highest month of housing starts in the U.S. this year (trailing only March) with 1.7 million new starts. The recently passed $1 trillion infrastructure funding package is another booster that, combined with strong construction demand, is setting the stage for more growth in the first half of 2022 and beyond. The infrastructure package includes a 35% increase in spending on highways over the current authorized allocation of $46 billion.

In addition to growth in the U.S., Caterpillar is expecting growth in other parts of the world, including China, India, and Indonesia. Combined with the U.S., these four regions account for 58% of projected global expansion and have helped the company achieve a 30% increase in both construction and mining segment sales year over year for the third quarter. Total revenue grew 25% year over year for the quarter, while profit margins grew 3%, driven by higher end-user demand for equipment and services as well as favorable pricing.

That level of growth could continue, as a compound annual growth rate of 4.3% is projected for the global construction equipment market through 2027, driven by increasing development in public infrastructure and rising population in emerging markets leading to further demand for equipment.

Not to be ignored, it should also be noted that Caterpillar pays a sturdy annual dividend of $4.44 per share at a yield of 2.3%. By comparison, the S&P 500‘s average dividend yield is 1.3%. The company also boasts the distinction of being a Dividend Aristocrat by annually increasing its dividend for at least 25 consecutive years, including a 7.8% increase in this year’s dividend. 

Image source: Nike.

2. Nike is off and running on local demand and strong pricing

An investment in Nike does not come without challenges, but it does offer investors the stability of brand and dividends. Most of the concern about Nike comes from supply chain constraints and political discord between the U.S. and China. Several analysts, including global financial services firm BTIG’s Camilo Lyon, point out that the Chinese market is slowing down overall growth because Chinese consumers are increasingly favoring domestic products. China sales declined 20% year over year in the most recent quarter. Fortunately, a 12% increase in North America sales and a 6% increase in the Europe, Middle East, Africa region is helping offset the declines in China.

Outside of China, Nike continues to face challenges brought on by COVID-19-related factory shutdowns. In Vietnam, the company still does not have 100% of its factories fully operational. With the company at 80% production capacity, CFO Matt Friend believes a rebound is underway and supply levels will normalize heading into the second part of the 2022 calendar year, which he sees as a recovery year for the company.

The word “recovery” can make some investors nervous, but it can also set the stage to gain a better entry point for a long-term strategy. If recovery is expected during the first half, that’s a good time for opportunistic investors to jump in and could likely push the stock price up in anticipation of a strong second half.

As part of its own long-term strategy, Nike continues to focus on digital sales, which jumped 11% year over year in the most recent quarter, highlighted by 40% growth in North America. The company also decided to cut ties with DSW, a leading shoe retailer, as it aims to route more sales through its own stores and online presence.

Speaking of online presence, Nike has also submitted new trademark applications as it looks to benefit from the metaverse. The company intends to make and sell virtual sneakers and apparel. The applications also include: downloadable virtual goods, retail store services, and entertainment services. We’ll see how these play out, but with a leading globally identifiable brand like Nike about to engage consumers via the metaverse, it could propel revenue to a whole new level.

Image source: Target and Disney.

3. Disney intends to immerse consumers in the metaverse

Not so long ago, Disney was celebrating a crazy-good third quarter, beating Wall Street estimates on revenue, earnings, and subscriber growth. At the time, its stock price jumped 5% basically overnight. Pandemic concerns were waning, and parks were regaining strength toward full capacity. As quickly as the positive news came in, it’s now being overshadowed by concerns of a drop-off in streaming service subscriber growth.

During the fourth quarter, the company experienced both sequential and year-over-year quarterly revenue growth. In addition, streaming service subscriptions totaled 179 million, growing at a rate of 60% year over year. The problem? Subscriptions for the quarter were 118 million, falling 1.2% short of consensus estimates.

Disney CEO Bob Chapek noted to investors that delays in production of movies and subsequent timing of releases in theaters would also impact the availability of content on its streaming services. The company also continues to incur costs to address government regulations and implement safety measures related to the pandemic. Whereas 2020 saw a portion of the full impact of COVID-19, 2021 saw a full year of impact, and now the omicron variant is spiking as we enter 2022. This information did not sit well with analysts and investors. The result? A stock price nosedive of about 12% in just the past two months.

The near-term headwinds will be troublesome for investors, but in the face of challenges, Disney has a full pipeline of releases, and revenue continues to grow, albeit somewhat restrained. But the company should rebound nicely once parks get to full capacity and new content is unleashed. The company has also made it known its desire to enter the metaverse realm, blending the physical with digital for consumers through its park experiences and streaming content. 

Upcoming releases, including streaming spin-offs of the highly successful Avengers and Star Wars lines, should pave the way to revenue growth. A stock-price rebound could start as soon as the beginning of the year as investors look for growth in streaming subscriptions, reduced costs related to production delays from COVID-19, and a return to pre-pandemic park attendance levels. And as more information comes out about Disney’s 2022 plans, I would expect to see the stock price jump quickly. The force is strong with Disney.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.