The Divisor Dilemma: Why Verizon's Days in the Dow Are Numbered

The Dow Jones Industrial Average represents American economic vitality, but not every component deserves a permanent seat. Since its 1896 inception as a handful of industrial stocks, the index has undergone nearly 60 changes to stay relevant. Today’s composition reflects 30 carefully selected multinational companies that define the modern economy. However, with the index’s share price-weighted methodology—where the divisor determines each stock’s proportional influence—some long-standing members are facing potential removal.

Among the most vulnerable is Verizon Communications, which joined the Dow in April 2004 as a growth story built on wireless ubiquity. Twenty-two years later, that narrative has grown stale. The telecom company’s recent performance raises serious questions about whether it still merits inclusion, particularly given how the divisor mechanism affects index composition and the company’s minimal dividend growth trajectory.

Why Verizon’s Valuation and Income Metrics Point Toward Removal

The mechanics of the Dow operate differently than market-cap weighted indices like the S&P 500. In this price-weighted system, the divisor is adjusted whenever stock splits or dividends occur, maintaining index continuity. A company’s influence within the Dow depends entirely on its nominal share price relative to this divisor—the higher the price, the greater the impact on daily movements.

Verizon faces a critical vulnerability here. Trading near $39 per share in late January, it ranks among the Dow’s lowest-priced components. This minimal share price contributes only roughly 241 points to the index’s 49,077-point total, making it one of the least influential members. When S&P Dow Jones Indices evaluates potential removals, they seek replacements with substantial three-digit nominal prices and meaningful economic significance.

Beyond valuation concerns, Verizon’s dividend story fails to inspire confidence in future growth. While the company maintains an impressive 7% yield—attractive for income investors—this reflects mature dividend payouts rather than expanding cash generation capacity. Over its entire 22-year tenure in the Dow, Verizon shares have appreciated just 17%, excluding dividend reinvestment. This represents a fundamental misalignment with an index designed to showcase the American economy’s highest-growth opportunities.

The real problem isn’t Verizon’s stability—it’s the absence of meaningful growth momentum. Facing already-saturated domestic wireless and broadband markets, the company realistically cannot achieve annualized growth rates exceeding low-to-mid single digits. For an index celebrating innovation and economic dynamism, Verizon has become too predictable.

The Logical Successor: A Technology Leader Bridging Multiple Growth Vectors

Any replacement must satisfy specific criteria: a three-digit share price, significant economic relevance, and multi-decade growth potential. Among Fortune 500 companies, only one trillion-dollar entity checks every box—Alphabet, parent company of Google.

Alphabet presents a compelling profile that Verizon can no longer match. Most fundamentally, the company’s 2022 stock split—a historic 20-for-1 division—reduced its per-share price from approximately $2,200 to roughly $110, making index inclusion feasible. Without this divisor adjustment through the split mechanism, Alphabet would remain ineligible. Today, with shares trading around $330, the company would rank as the Dow’s ninth-most influential member by share price.

The investment case rests on Alphabet’s dual-engine growth model. Advertising revenue, representing 72.5% of sales, flows primarily through Google Search—which maintains virtual monopoly status in global search share. This segment demonstrates the cyclical nature of digital marketing and provides a valuable barometer of overall advertising health for the index.

Simultaneously, Alphabet operates a high-margin cloud computing division that incorporates generative AI solutions. Google Cloud ranks third globally in infrastructure spending, with growth rates exceeding 30% annually. This technological frontier offers genuine long-term appreciation potential versus Verizon’s mature dividend profile.

Since its August 2004 IPO, Alphabet has delivered a compound annual return exceeding 25%—the kind of measurable wealth creation that can elevate the Dow beyond 50,000. Among Wall Street’s five most valuable public companies, Alphabet remains notably absent from the index. This omission appears increasingly indefensible given its economic prominence and growth trajectory.

The Competitive Case: Why Other Replacements Fall Short

Alternative candidates exist, yet each presents limiting factors. T-Mobile offers faster wireless growth but operates under a similar business model to Verizon, potentially facing comparable headwinds within a decade. Meta Platforms brings valuable advertising-sector exposure, but its $600+ share price creates an extreme high-end weighting issue, especially given Meta’s historical resistance to stock splits.

Alphabet, by contrast, balances immediate relevance with future dynamism. It bridges technology and communications naturally, maintains reasonable valuation within the divisor framework, and represents the economic transformation the Dow should spotlight.

As May 2026 approaches—marking the index’s 130th anniversary—S&P Dow Jones Indices will undoubtedly evaluate component strength. For Verizon, the combination of depressed share price, stagnant returns, and dividend-dependent income profile suggests the decision has likely already been made. Alphabet’s inclusion would signal that the Dow remains committed to capturing authentic economic growth rather than clinging to yesterday’s telecommunications champions.