The Dow Jones Industrial Average, which tracks the performance of 30 leading companies, has recently reached new highs. However, some of its component stocks have yet to fully recover from the 2022 bear market, presenting a unique opportunity for investors. Two stocks, Verizon Communications and Walt Disney, are positioned for a potential surge in 2025, making them timely investments.
Verizon Communications: Growth Fueled by 5G and High Dividends
Verizon Communications is regaining momentum after experiencing a steep decline during the market sell-off of 2022. While the company faced challenges during the downturn, its financial performance has strengthened significantly in recent quarters. The stock remains undervalued, as reflected by its high dividend yield, signaling room for growth.
Verizon’s dividends have long appealed to investors, with the company distributing 59% of its adjusted earnings. This strategy has resulted in a forward yield of 6.28%, making it an attractive choice for income-seeking investors. The recent half-point interest rate cut by the Federal Reserve has also eased concerns about high-yield stocks, reducing the pressure on Verizon’s dividend payouts.
The company’s performance has been bolstered by consistent revenue from its wireless services. By the end of 2023, Verizon recorded 94 million postpaid connections, marking steady customer engagement through monthly billing plans. Its wireless service revenue increased 3.5% year-over-year, reaching $19.8 billion in the second quarter of 2023.
Broadband service is another area where Verizon is gaining traction. In the last quarter, the company added 391,000 new broadband customers, surpassing the number of new customers added in the previous quarter. As 5G adoption grows, Verizon is expected to benefit from customers upgrading their plans. The introduction of AI-optimized smartphones, such as Apple’s new iPhone, may further drive growth by encouraging consumers to switch to advanced wireless services.
With improved financial results and favorable long-term earnings projections, Verizon is well-positioned for a significant rise in 2025.
Walt Disney: Strategic Changes Pave the Way for a Comeback
Walt Disney, a long-standing entertainment giant, has faced difficulties over the past few years, with its stock falling out of favor on Wall Street. Issues such as lower-than-expected Disney+ subscriber growth and profitability challenges contributed to the decline. However, Disney is showing clear signs of recovery, offering investors a rare opportunity to invest at a discount.
With CEO Bob Iger back in charge, Disney’s financial outlook has improved considerably. Revenue growth has returned, and the company has shifted its focus to driving profitability. In the most recent quarter, Disney reported earnings per share (EPS) of $1.43, a significant turnaround from the $0.25 loss reported in the same period last year.
A major factor behind Disney’s earlier financial struggles was the heavy investment in content for its direct-to-consumer (DTC) segment, including its streaming services. These investments initially reduced net income, but the DTC segment achieved profitability ahead of management’s target.
Disney is now implementing measures to strengthen Disney+ by tackling unauthorized password sharing, following a strategy similar to Netflix’s. The new policy, which will take effect this fall, requires all viewers to pay for their own memberships. This shift is expected to drive subscriber growth, as Netflix’s experience demonstrated the financial benefits of curbing password sharing.
Despite these improvements, Disney’s stock remains undervalued, trading at under $100 with a forward price-to-earnings (P/E) ratio of 18 based on fiscal 2025 estimates. Analysts are forecasting a 14% long-term earnings growth rate, suggesting the potential for Disney’s stock value to double within five years.
Promising Prospects for Verizon and Disney in 2025
Both Verizon Communications and Walt Disney present compelling investment opportunities as they rebound from recent challenges. Verizon’s focus on 5G technology, coupled with its strong dividend yield, positions it well for future growth.
Meanwhile, Disney’s financial recovery and strategic changes in its streaming business offer the potential for substantial stock appreciation. Investors looking for promising stocks within the Dow Jones index may find these two companies particularly attractive heading into 2025.
