With uncertainty being the hallmark of 2020, blue-chip stocks are an investor-favorite for many reasons right now. These stocks provide stable returns and are typically safe plays. However, blue-chip investments don’t offer gains in the short-term and require a long holding period.
But blue-chip companies are usually large, well-established businesses that have a history of steady growth. That makes the long-term worthwhile. In today’s turbulent economy, investors have taken a liking to these stocks because they add more reliability to the asset mix. In fact, the name blue-chip is derived from poker — in the game, the blue chips have the most value.
These stocks are also known for their consistent dividends. With compounding value added to the mix, the right stocks can generate some hefty returns.
So, if you are looking to add some blue-chip stocks to your portfolio, here are my top 7 picks:
- McDonald’s (NYSE:MCD)
- AbbVie (NYSE:ABBV)
- Apple (NASDAQ:AAPL)
- Shopify (NYSE:SHOP)
- Home Depot (NYSE:HD)
- Alibaba (NYSE:BABA)
- Facebook (NASDAQ:FB)
Blue-Chip Stocks to Buy: McDonald’s (MCD)
Dividend Yield: 2.4%
The historical performance of a company can provide a lot of insight into a stock’s future returns. Fast-food chain McDonald’s is known for its unique ability to find a way through thick and thin. That makes it one of the more reliable blue-chip stocks. In 2008, the company cruised past the Great Recession, increasing its payout while other companies slashed dividends.
This stellar performance has only carried forward during the pandemic. McDonald’s’ drive-thru business and digital orders became the company’s saving grace. The chain announced that most of its stores were open by July as well.
In its most recent quarter, McDonald’s reported a 4.6% gain in same-store sales. It achieved this while sustaining a dividend yield of over 2.4%. What’s more, analysts predict MCD stock is on track to report even stronger results in 2021.
Dividend Yield: 5.5%
AbbVie operates in a pretty niche industry — being a “research-driven biopharmaceutical company” — but the company’s strong fundamentals make it a great addition to your portfolio. The firm created the best-selling drug Humira. On top of that, the company also recently completed its acquisition of Allergan, the maker of Botox. Allergan is a major player in the aesthetic medicine industry and will allow AbbVie to expand its footprint in this space.
Healthcare stocks tend to do well in periods of economic uncertainty, and blue-chip stocks like ABBV stock are proof of that. What’s more, according to some market analysts, the company is undervalued right now.
That makes this the perfect time to buy into AbbVie. And if that’s not enough to convince you, the healthcare giant recently announced a 10% increase in its dividend for 2021.
Dividend Yield: 0.7%
Apple’s suite of successful products and services will keep the tech giant in the limelight for years to come. What makes this company different is its focus on innovation — and making a show of that innovation. That has garnered Apple a cult following of over a billion users. Moreover, the company’s wide range of offerings keeps users in its ecosystem as they live, work and play via Apple products.
The pandemic has also served as a unique advantage to the company. As people have had to spend more time at home, they’ve turn to Apple services for entertainment. This led the company to create Apple One, which groups services like the Cloud, Apple Music and Apple TV into one convenient bundle.
Finally — when it comes to its best-selling product series — the company just launched the new 5G enabled iPhone 12. As one of the pioneers in smartphone technology, AAPL stock sees a lot of upside ahead.
With a stable, albeit tiny, dividend yield of 0.7% as well as an innovative business model, this pick of the blue-chip stocks represents a great investment for the long-haul.
Dividend Yield: N/A
Another one of the blue-chip stocks that’s making waves this year is e-commerce giant Shopify. The company offers e-commerce solutions for small and mid-sized businesses. As the pandemic forced brick-and-mortar storefronts to shut their doors, Shopify’s service became a necessity for many. That sharp increase in users has translated to fruitful gains in 2020.
What’s more, SHOP stock’s growth will not stop there. The dominance of e-commerce this year has likely created permanent changes in the way we consume goods and services. This puts Shopify in a great position. Moreover, the package of services offered by the company is unmatched by its competitors. This differentiated product will be key to Shopify maintaining its leading role in the industry.
With e-commerce set to reach a market valuation of $6 trillion by 2024, Shopify is undoubtedly a great play right now.
Home Depot (HD)
Dividend Yield: 2.2%
Despite what you might think, the technology and healthcare sectors are not the only winners this year. Home Depot — the home improvement and construction powerhouse — was also in a unique position to benefit from the pandemic. As the lockdown went into effect, people were forced to spend more time at home. For many, this made Home Depot an essential business.
That’s because people started working on small home improvement projects to fill their time as well as improve their work-from-home experiences. In turn, Home Depot saw a substantial surge in revenue. The company reported a 23% increase in sales from the prior year in its second quarter. Additionally, HD stock has now established a strong e-commerce footprint.
As sales continue to rise in the coming months, this pandemic-friendly business is one of the best blue-chip stocks you can buy.
Dividend Yield: N/A
As we’ve said before, e-commerce has been the running theme of this year, monopolizing the retail sector in 2020. And within e-commerce itself, Chinese tech giant Alibaba continues to be one of the top-performing blue-chip stocks in the field.
In case you’re unfamiliar with the company, Alibaba is often likened to being the Amazon (NASDAQ:AMZN) of China. As the e-commerce leader in one of the most populated countries in the world, the company’s growth potential is nearly limitless. Moreover, its wide portfolio of smaller businesses has only contributed to its growing digital footprint.
Alibaba’s platform has a userbase of over 755 million — more than double the population of the U.S. and greater than the entire population of the European Union. With that in mind, one of the company’s top-performing segments has been the cloud business, which grew by 59% this year. That can most likely be attributed to the increase in remote work and its resulting demand for cloud services worldwide. In short, the pandemic has made BABA stock’s already booming business even more successful.
If you are looking for an e-commerce play that will generate substantial long-term returns, Alibaba stock is a worthy investment.
Dividend Yield: N/A
Of course, social media giant Facebook needs no introduction. With over 2.7 billion users and a market capitalization of over $830 billion, Facebook is one of the best blue-chip stocks on the market. In addition to its primary platform, the company also owns subsidiaries such as WhatsApp and Instagram — both extremely successful entities.
Additionally, the recent surge in e-commerce did wonders for the company’s bottom line. In its most recent quarter, Facebook announced an increase in ad revenue as more retailers went online. While FB stock does trade at a premium value and offers no dividend, it is this kind of steady growth that makes Facebook worthwhile.
Given the ever-growing power of social media — and technology in general — Facebook is a more than reliable bet in today’s Covid-19 economy.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020.