S&P Dow Jones Indices LLC said Friday that health insurance company UnitedHealth Group Inc. (UNH) will replace food giant Kraft Foods Inc. (KFT) in the Dow Jones Industrial Average after the close of trading on September 21, Friday.
The move follows Kraft Foods' plan to spin off its North American grocery business on October 1.
The Dow Jones Industrial Average or DJIA, considered to be an iconic indicator of the U.S. stock market, is a price-weighted measure of 30 U.S. blue-chip companies.
S&P Dow Jones Indices, which manages the DJIA and is a unit of McGraw-Hill Companies Inc. (MHP), noted that the change will be effective with the opening of trading on Monday, September 24.
Following the spin-off of its North American grocery business that will be named Kraft Foods Group, parent company Kraft Foods will be renamed Mondelez International Inc. and change its ticker symbol to 'MDLZ.'
Meanwhile, Kraft Foods Group will begin to trade on the Nasdaq Global Select Market under the ticker symbol 'KRFT' from October 2.
S&P Dow Jones Indices said, "The Dow Jones Averages Index committee believes that Mondelez's reduced market capitalization and projected lower percentage of revenue generated from the U.S. makes the company less representative of the U.S. Large Cap market space."
Further, the index managers said that the addition of UnitedHealth brings added health care diversification to the DJIA, and reflects the growing importance of healthcare spending in the U.S. economy.
Other healthcare companies currently in the Dow Jones industrial index are pharmaceutical companies Merck & Co. Inc. (MRK) and Pfizer Inc. (PFE) as well as healthcare and drug giant Johnson & Johnson (JNJ).
S&P Dow Jones Indices also noted that the changes will not cause any disruption in the level of the Index.
On Thursday, the Dow Jones Industrial Average jumped 206.51 points or 1.6 percent to close at 13,539.86, marking its best closing level in well over four years.
The last change to the Dow Jones Industrial Average was made way back in June 2009, when computer networking gear maker Cisco Systems Inc. (CSCO) and insurer Travelers Companies Inc. (TRV) replaced automaker General Motors Co. (GM) and financial services giant Citigroup Inc. (C) respectively.
In late July, UnitedHealth posted a higher second-quarter profit and lifted its outlook for fiscal 2012. Net earnings for the second quarter rose to $1.34 billion or $1.27 per share from $1.27 billion or $1.16 per share in the prior year. Revenues for the quarter grew 8 percent to $27.27 billion.
UnitedHealth said in June that its board of directors raised the quarterly dividend by 30.7 percent and also renewed the company's share repurchase program, authorizing the purchase of 110 million shares over time.
In Friday's regular session, UNH is trading at $54.62, up $0.73 or 1.35 percent on a volume of 4.43 million shares.
KFT is trading at $40.04, down $0.09 or 0.21 percent on a volume of 6.43 million shares.
by RTT Staff Writer
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