What Walgreens stock replacing GE may mean for the Dow Jones Industrial Average

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, -1.89% . But the planned move also has consequences for the price-weighted Dow average DJIA, -1.15% 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 Inc. WBA, +0.72%  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, +0.73% , Procter & Gamble Co. PG, +0.65% and Coca-Cola Co. KO, +0.11% .

Secondly, the change marks the Dow's first alteration since September, upon the consummation of the merger between Dow Chemical Co. and then-Dow component DuPont & Co., creating the entity DowDuPont Inc. DWDP, -2.11% .

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:

Jan 1, 2002: 0.144521

June 3, 2002: 0.14445222

Aug. 21, 2002: 0.14418073

Nov. 19, 2002: 0.14585278

Feb. 18, 2003: 0.14279922

Aug. 20, 2003: 0.14249417

Sept. 30, 2003: 0.13500289

April 8, 2004: 0.14090166

June 6, 2004: 0.13561241

Nov. 15, 2004: 0.13532775

June 13, 2005: 0.13033708

July 14, 2005: 0.12560864

Oct. 3, 2005: 0.12493117

Nov. 20, 2006: 0.12482483

April 2, 2007: 0.123051408

June 13, 2007: 0.123017848

Feb. 19, 2008: 0.122834016

April 1, 2008: 0.122820114

Sept. 22, 2008: 0.125552709

June 8, 2009: 0.132319125

July 2, 2010: 0.132129493

Aug. 13, 2012: 0.12914682

Sept. 24, 2012: 0.130216081

Sept. 23, 2013: 0.155715905

March 19, 2015: 0.14985889

July 1, 2015: 0.149677273

Dec. 24, 2015: 0.146021281

Sept. 1, 2017: 0.145233969

According WSJ Market Data Group, Walgreens' shares would rank it as the seventh-least-influential Dow component, based on its closing price as of June 19.

Ticker	Name	Closing Price
GE (to be removed June 26)	General Electric Co.	$12.95
PFE	Pfizer Inc. PFE, +0.17%	$36.22
KO	Coca-Cola Co.	$43.60
CSCO	Cisco Systems Inc. CSCO, -0.88%	$43.82
VZ	Verizon Communications Inc. VZ, +2.19%	$48.50
INTC	Intel Corp. INTC, -0.54%	$52.93
MRK	Merck & Co., Inc. MRK, +0.07%	$61.03
WBA	Walgreens Boots Alliance Inc.	$64.61

Moreover, the consumer-staples names have exacted a 227-point year-to-date toll on the Dow, after adding some 287 points to blue chips in 2018 (see table below).

Company	YTD contribution to the Dow	2017 contribution to the Dow
Coca-Cola	-15.70	30.28
P&G	-107.07	53.40
Walmart	-104.25	203.68
Total	-227.01	287.37

Consumer staples have mostly underperformed this year because that sector has struggled to pass on rising costs to customers and are contending with the rise of Amazon.com Inc. AMZN, +0.64% , which has made exerting pricing power on companies that make household goods challenging.

Consumer staples, as measured by the exchange-traded Consumer Staples Select Sector SPDR ETF XLP, +0.53% , are down 10.3% so far this year and off about 9.2% over the past 12 months, according to FactSet data.

Still, the performance of Walgreens, particularly as funds that track the Dow are compelled to buy shares of the company to reflect the coming change, may outstrip that of embattled GE.

Read: AT&T's stock could beat Apple's now that it's out of the Dow

Walgreen's shares are down 11% year to date and off about 19% over the past year, compared with GE's stock, which has lost 26% in the first six month of the year and 55% in the past 12 months.

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