Walgreens shares enters the Dow on June 26
General Electric is being replaced by Walgreens Boots Alliance Inc. as one of the 30 components of the 122-year-old Dow Jones Industrial Average.
The change brings and end to the tenure of the oldest and only remaining original component of the blue-chip focused Dow, and caps a decisive downtrend for embattled GE GE, -0.97% But the planned move also has consequences for the price-weighted Dow average DJIA, -0.28% which has become one of the most closely watched equity benchmarks since its creation in 1896, then-comprised of just 12 components.
For one, the addition of Walgreens Boots Alliance WBA, +3.44% adds shares of a fourth company to the consumer-staples category, representing businesses that sell staples like cereal, toothpaste and razors, among other household goods. Presently, the blue-chip benchmark's consumer-staples group comprises Walmart Inc. WMT, -0.17% Procter & Gamble Co. PG, -0.78% and Coca-Cola Co. KO, -0.28%
Secondly, the change marks the Dow's first alteration since September, following the consummation of the merger between Dow Chemical Co. and then-Dow component DuPont & Co., creating the entity DowDuPont Inc. DWDP, -1.23%
Most important, the addition of Walgreens stock means that the so-called divisor of the Dow will change.
The so-called divisor, or in this case multiplier, is the figure used to determine the influence of any of the 30 components that make up the benchmark.
The Dow isn't exactly an average of its components, as its name might imply; instead, the value of the Dow is determined by calculating the sum of the share price of its members using a divisor. Presently, that divisor stands at 0.145233969. That means any $1 move in any one of the Dow's components equates to a 6.89-point swing in the average. The divisor will be changed just before the Dow's opening on June 26.
Here's when some past divisor changes have occurred: