The immense volatility created by Covid-19 has fostered short-term investing strategies that generate quick moolah. However, with retirement in mind, it’s prudent to invest in stocks that have stood the test of time and provided consistent returns. Blue chip stocks are large-cap companies with established business models and a stable dividend profile. Along with long records of attractive returns, they exhibit healthy growth in their value.
What sets blue chip stocks apart from other picks is the depth of their business models as well as their ability to diversify over time. Blue chip companies can weather downturns with far-reaching operations and post steady revenues in the toughest of times.
These seven stocks have done just that — even in the wake of the biggest health crisis in modern history.
- Qualcomm (NASDAQ:QCOM)
- Coca-Cola (NYSE:KO)
- Procter & Gamble (NYSE:PG)
- Johnson & Johnson (NYSE:JNJ)
- Walmart (NYSE:WMT)
- Starbucks (NASDAQ:SBUX)
- Microsoft (NASDAQ:MSFT)
Blue Chip Stocks to Buy: Qualcomm (QCOM)
Semi-conductor giant Qualcomm has had a rough 2020 and for obvious reasons. However, with its strong positioning in the 5G market, investors can expect things to turn around swiftly for this pick of the blue chip stocks.
Qualcomm provides smartphone developers with 5G chipsets, a unique and fruitful positioning. With over 500 million 5G smartphones set to ship in 2021, the company is poised to rake in billions in sales. For instance, the company’s fourth quarter’s results were solid — much improved from its previous quarters, with 35% growth in revenues. Net income also rose by 76%, comfortably beating analyst estimates.
On top of that, QCOM stock has arguably one of the better dividend portfolios in its industry, with robust cash flows offering support for years to come. Qualcomm’s dividend is currently at 1.66%. Plus, its dividend growth in the past five years has been an impressive 6.68% and should rise handsomely near the 5G technology peak.
Beverage giant Coca-Cola continues to be at the top of the heap as far as soft drinks are concerned. Its ubiquitous presence dominates the food and beverage industry with unparalleled brand equity.
That said, though, 2020 has presented some challenges for KO stock, with a 12-month return of -17.4%. Revenues have taken a hit during the pandemic, but Coca-Cola’s third-quarter recovery shows that it will return to its winning ways soon. The company also continues to pursue an aggressive growth strategy by launching innovative products and acquiring new brands. More specifically, its array of brands is beginning to target new segments. For example, the company has plans to roll out an alcoholic drink — Topo Chico Hard Seltzer — across Europe.
And the worst of the pandemic is behind us. So, with an incredible, consistent dividend yield of 3.44% and a payout ratio of 86.42%, this one of the blue chip stocks is a must-have in your portfolio. Despite its recent shortcomings, Coca-Cola is an evergreen pick that cannot be ignored.
Procter & Gamble (PG)
Cincinnati-based consumer products company Procter & Gamble has long been a gold standard name for income-oriented investors. Its robust divisions, iconic intellectual properties and 64-year history of dividend growth make PG stock a no-brainer investment.
Despite the pandemic, the company’s earnings results for the final quarter of 2020 were nothing short of amazing. In the face of harsh economic conditions, revenues rose 8% year-over-year (YOY) in Q2 of 2021, on the back of strong growth across all primary segments. Net earnings for its core business also grew by a remarkable 20% in the quarter.
Finally, the company has also lifted its revenue guidance to 5% to 6% growth in 2021 compared to its previous guidance of 3% to 4%. Despite the challenging times, its 1-year dividend growth is impressive at 6%, with a payout ratio of more than 55% and a yield of 2.47%. That makes this pick of the blue chip stocks a keeper.
Johnson & Johnson (JNJ)
Healthcare giant Johnson & Johnson is one of the most well-rounded and diversified companies in the healthcare industry. With a perfect AAA debt rating, the company has over $30 billion in its cash balance.
On top of that, JNJ boasts one of the strongest dividend portfolios in the sector, with 58 years of growth and a dividend yield of 2.48%. Despite the challenges presented by the pandemic, JNJ stock’s 12-month return is currently at a healthy 10%.
Lastly, Johnson & Johnson’s earnings results have been weighed down by the pandemic but are finally picking up the pace again. The company recently reported Q4 results, where its revenues came in 8% higher YOY and beat expectations. What’s more, its two critical segments, pharmaceuticals and consumer health, witnessed healthy growth during the quarter. But the cherry on top is the company’s potential one-dose Covid-19 vaccine, currently in the third phase of its clinical trials.
Given all this, Johnson & Johnson is one of the best names among blue chip stocks, well-positioned for a spectacular 2021 with multiple growth catalysts.
Retail giant Walmart has been an unexpected winner during the pandemic. That’s because — though this company is known mostly for its brick and mortar business — WMT’s e-commerce abilities have come to the forefront over the course of the outbreak.
More specifically, Walmart has been developing its e-commerce competencies through smart acquisitions, partnerships and the re-invention of certain aspects of its business. As a result, WMT stock has generated 22.7% in returns in the past 12-months.
What’s more, WMT’s revenues are on track to exceed the $550 billion mark this year, primarily due to that solid e-commerce growth. The company has actually been pushing in the online direction for quite some time, the culmination of that being its subscription offering called Walmart Plus. The service offers members faster delivery times, a quicker checkout process and discounts. According to one research platform, within two weeks of Walmart Plus’s launch over 11% of Americans had subscribed.
Add to that the company’s robust dividend portfolio — with a healthy payout ratio of 38.7% and dividend growth for the past 47 years — and this is a surefire play. Walmart is arguably among the cream of the crop as far as blue chip stocks are concerned.
Coffee giant Starbucks has understandably had a rough 2020, along with the rest of the restaurant and hospitality sector. However, it has proven to be relatively resilient compared to its peers in leveraging online channels in increasing sales.
Moreover, as we get closer to a post-pandemic reality, the company has plans to expand its store count and international outreach aggressively. Despite lackluster financial results, SBUX stock is up 28.3% in the past six months.
The company also recently reported its first-quarter earnings for fiscal 2021, which comfortably beat analyst estimates. For one, revenues showed signs of recovery. SBUX also opened more than 278 new stores in the quarter and plans to have a total of 55,000 stores by 2023. Specifically, the coffee company aims to target international markets, having already established a large presence in the United States. China will be a core market for the company, which should significantly expand its growth runway.
Though Starbucks expects its business to more fully recover in 2022, investors should value its robust business model, healthy cash flows and stable dividend history now. When it comes to blue chip stocks, this is not a name you should ignore.
Last on my list of blue chip stocks, software giant Microsoft never ceases to surprise. The company has proven time and again that it has the ability to provide services that continually add value to the lives of its users.
Of course, Covid-19 tailwinds helped push growth into high gear for some of the company’s products, such as Microsoft Teams and its 365 Office suite. Moreover, MSFT’s hybrid cloud solutions have also witnessed tremendous growth and its next-generation gaming console, the Xbox Series X, has been hugely successful. As such, MSFT stock has proven to be resilient during the pandemic, with 12-month returns of roughly 40%.
In terms of finances, the company’s earnings results remained healthy in the past year despite the effects of the pandemic. In its most recent quarter, revenue rose 17%. Microsoft also witnessed healthy growth across all segments, mainly its cloud services and productivity software divisions. Finally, gaming revenue was up 51%.
With an incredible showing in 2020, MSFT’s healthy dividend payout of $2.24 may also rise this year.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.