Dow Jones Index (DJIA)

Dow Jones Index (DJIA): The “Original 12” Companies

Originating in 1896, the Dow Jones Industrial Average (DJIA), also called the “Dow”, was one of the first stock indices created and remains one of the most widely followed indicators of stock market performance.

The DJIA stock index tracks 30 large-cap U.S. companies and is used as a proxy for the health of the stock market as a whole.

The DJIA index was initially comprised of just 12 companies, mostly operating in the industrials sector.

The “Original 12” in the DJIA are as follows, listed in alphabetical order:

1. American Cotton Oil
2. American Sugar
3. American Tobacco
4. Chicago Gas
5. Distilling & Cattle Feeding
6. General Electric
7. Laclede Gas
8. National Lead
9. North American
10. Tennessee Coal and Iron
11. U.S. Leather
12. U.S. Rubber

Around that time period, these 12 companies were market leaders and considered the most influential companies in their respective fields (e.g. coal, gas, rubber, leather).

From the perspective of the creators – Charles Dow, Edward Davis Jones, and Charles Bergstresser – tracking the DJIA index was a useful measure of not only the stock market but also the U.S. economy.

Since then, the DJIA has shifted to expand beyond just the industrial sector to better gauge the health of the entire stock market, despite the name remaining unchanged (i.e. “Industrial Average”).

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DJIA Chart: Stock Market Performance (Dow Jones Today?)

The DJIA index nowadays consists of 30 companies, which has been the case since 1928.

Together, the index helps investors grasp the prevailing stock pricing trends and general market performance, with the index readily available on sites such as the following financial resources:

• Bloomberg
• Wall Street Journal
• CNBC
• S&P Global

From any of the resources listed above (and more sites online), one can check the performance of the Dow Jones index on any given trading day.

^{DJIA 2021 Year-to-Date Performance (Source: WSJ)}

DJIA Index Holdings: List of 30 Public Company Stocks (Updated: 2023)

As of December 2021, the following companies make up the DJIA index:

DJIA Structure: Price-Weighted Index + “Dow Divisor”

Most stock market indexes – notably the S&P 500 and Nasdaq composite – are weighted by market capitalization.

The “market cap” is calculated by multiplying the company’s share price by the number of shares outstanding, which is a better approximation of relative size than share prices by themselves.

Conversely, the Dow Jones Industrial Average (DJIA) is price-weighted, meaning that the value of the DJIA is calculated from the average stock prices of the 30 companies tracked by the index.

Therefore, the average value of the index could be derived by simply adding together all the stock prices and then dividing by the total number of companies (i.e. 30).

But the calculation becomes less straightforward when considering certain corporate events that complicate the basic arithmetic, such as:

• Mergers and Acquisitions (M&A)
• Stock Splits and Reverse Stock Splits
• Shareholder Dividends
• Stock Buybacks

The “Dow Divisor” was formally introduced later to adjust for these complexities. The divisor is the denominator by which the sum of the 30 share prices is divided, so the extra step is to divide the sum of all 30 share prices by the divisor.