The Dow Jones Industrial Common(DJINDICES: ^DJI) had a terrific 12 months in 2025, with a whole return of 14.9%. But it surely nonetheless fell wanting the Nasdaq Composite‘s (NASDAQINDEX: ^IXIC) 21.1% whole return, marking the eighth 12 months out of the final 10 that the Dow has underperformed the Nasdaq.
This is why the Dow may go towards the percentages and outperform the Nasdaq and the S&P 500(SNPINDEX: ^GSPC) in 2026, what it may imply in your monetary portfolio, and 5 Dow dividend shares to purchase now.
Picture supply: Getty Pictures.
The Nasdaq Composite accommodates hundreds of shares listed on the Nasdaq alternate, whereas the S&P 500 is comprised of round 500 main large-cap firms. The Dow is much more selective, with simply 30 holdings.
A giant distinction between the Dow and different indexes is that it is price-weighted slightly than market-cap weighted, which means probably the most priceless firms do not carry probably the most weight. The 5 largest holdings in each the Nasdaq and the S&P 500 are Nvidia, Alphabet, Apple, Microsoft, and Amazon. The 5 largest Dow holdings by weighting are Goldman Sachs, Caterpillar, Microsoft, American Categorical, and House Depot (NYSE: HD).
Large outperformances by monetary shares with excessive nominal inventory costs, similar to Goldman Sachs, American Categorical, Visa, and JPMorgan Chase, have pushed financials to turn into the biggest sector within the Dow. They make up 28.3% of the index, adopted by 20.2% for tech and 14.7% for industrials. The Nasdaq is dominated by tech-focused firms, whereas 34.4% of the S&P 500 is in tech.
The addition of Nvidia and Amazon (in 2024) and Salesforce (in 2020) has made the Dow extra growth-stock-focused. But it surely’s value noting that Amazon and Salesforce each closely underperformed the S&P 500 in 2025. So did Dow parts Apple and Microsoft. Though Nvidia crushed the S&P 500 once more in 2025, it solely makes up 2.3% of the Dow in comparison with 7.2% of the S&P 500 and 13.4% of the Nasdaq-100, which is the 100 largest non-financial firms by market cap listed on the Nasdaq inventory alternate.
During the last decade, the largest 12 months of outperformance for the Dow relative to the Nasdaq and S&P 500 was 2022, when the Dow misplaced worth, however did not fall as a lot because the S&P 500 or Nasdaq. 2016 is the one different 12 months the Dow beat the Nasdaq, though it was shut in 2017, 2018, and 2021.
Whole Return
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Nasdaq Composite
8.9%
29.6%
(2.8%)
36.7%
44.9%
22.2%
(32.5%)
44.6%
29.6%
21.1%
S&P 500
12%
21.8%
(4.4%)
31.5%
18.4%
28.7%
(18.1%)
26.3%
25%
17.9%
Dow Jones Industrial Common
16.5%
28.1%
(3.5%)
25.3%
9.7%
21%
(6.9%)
16.2%
15%
14.9%
Information supply: YCharts.
All informed, the Nasdaq produced a complete return of 408.3% during the last decade, in comparison with 298.3% for the S&P 500 and 242.6% for the Dow.
Given its focus in industry-leading worth shares, the Dow ought to maintain up higher throughout a inventory market sell-off than the Nasdaq or S&P 500. That is very true if the sell-off is pushed by themes that the Dow is much less uncovered to, like synthetic intelligence.
The SPDR Dow Jones Industrial Common ETF, which tracks the index, has a price-to-earnings (P/E) ratio of simply 23.9 in comparison with 29.2 for the Vanguard S&P 500 ETF and a whopping 33.5 for the Invesco QQQ Belief, which tracks the Nasdaq-100. So the Dow ought to maintain up properly if there’s a number of compression in 2026 — which means that inventory costs develop slower than earnings. The theme lately has been a number of enlargement, as a result of inventory costs have risen quicker than earnings. A number of enlargement can run wild throughout bull markets when traders are optimistic about potential progress, slightly than solely specializing in what firms are producing at the moment.
Even when worth shares outperform progress shares in 2026, that does not imply it is a good suggestion to overtake your funding portfolio by promoting out of profitable positions and loading up on blue chip Dow dividend shares. Moderately, a greater method is to conduct a portfolio overview and make the case for proudly owning shares with stretched valuations.
A fantastic firm at a premium value is commonly a greater long-term holding than an honest firm at a terrific value. As a result of valuations are sometimes primarily based on trailing 12-month earnings or projected earnings over the subsequent 12 months, an organization with a transparent runway for future progress over the subsequent three to 5 years could also be extra moderately priced than it seems at first look.
Nonetheless, traders trying to spherical out a growth-driven portfolio with worth shares can flip to main dividend-paying Dow parts like Coca-Cola, Procter & Gamble, Chevron, McDonald’s, and House Depot.
Coca-Cola and Procter & Gamble have elevated their dividends for over 60 consecutive years — making them Dividend Kings, which have a observe report of at the very least 50 consecutive years of dividend progress. Each shares have pulled again recently as a consequence of a widespread sell-off within the client staples sector.
McDonald’s is on observe to turn into a Dividend King this 12 months, whereas Chevron has elevated its dividend for 38 consecutive years. House Depot does not have as lengthy a streak, however it’s a nice worth for traders who consider in a housing market and client spending restoration.
2026 will probably be a prove-it 12 months for a lot of AI progress shares, particularly firms which have ramped capital expenditures. Traders who’ve been shopping for these shares will need to see spending translate to earnings progress to justify excessive multiples.
Any hiccups may result in the Dow outperforming the Nasdaq and S&P 500 as a result of it has much less publicity to tech and tech-focused firms. The Dow may additionally outperform if cyclical sectors outdoors of tech, like finance and industrials, lead the market in 2026.
Before you purchase inventory in Dow Jones Industrial Common, take into account this:
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JPMorgan Chase is an promoting accomplice of Motley Idiot Cash. American Categorical is an promoting accomplice of Motley Idiot Cash. Daniel Foelber has positions in Nvidia and Procter & Gamble and has the next choices: quick February 2026 $150 calls on Procter & Gamble. The Motley Idiot has positions in and recommends Alphabet, Amazon, Apple, Chevron, Goldman Sachs Group, House Depot, JPMorgan Chase, Microsoft, Nvidia, Salesforce, Vanguard S&P 500 ETF, and Visa. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
