Blue-chip stocks got their name from the highest value of poker chip, at least for that time. And while there’s no precise definition, most analysts define a blue-chip stock as a company with a market capitalization of at least $5 billion. But generally speaking, investors need to look to large-cap companies — those with market caps of at least $10 billion — to find quality blue-chip stocks to buy.
That’s because these are companies that are in mature phases of their business cycle. This maturity allows them to deliver consistent revenue and profits for their shareholders. Thus, these are companies with strong balance sheets and positive free cash flow.
That doesn’t mean they don’t provide innovation, it’s just that they don’t rely on it. These are value stocks first and foremost. And that’s why many, although not all, blue-chip stocks pay a dividend.
In turn, this makes these stocks a smart choice during times when economic uncertainty is expected. Therefore, here are seven blue-chip stocks to buy right now.
|UPS||United Parcel Service||$185.51|
Blue-Chip Stocks to Buy: McDonald’s (MCD)
First on this list of blue-chip stocks to buy is McDonald’s (NYSE:MCD). The fast-food giant showed its resiliency during the pandemic, as the “Golden Arches” made a successful pivot to a drive-thru and delivery-only option. And now with the restaurants open again, the company continues to drive efficiency through in-store ordering kiosks and its mobile app.
Many investors have made the mistake of betting against McDonald’s when the economy faced turbulent times. But it only took MCD stock about five months to recover from the 30% pandemic selloff. And even after several drops this year, the stock is down just 7% for the year.
This is not an undervalued company and analysts only give MCD stock about a 13% upside from current levels. However, McDonald’s illustrates the power of a familiar brand that delivers a consistent product. And investors get a healthy dividend that calculates to $5.52 per share on an annual basis and has been increasing for 46 years.
Danaher (NYSE:DHR) designs, manufacturers and markets products and services for its medical, industrial and commercial clients. As part of the company’s business model, it emphasizes sustainable and growing revenue streams. In fact, according to one analyst, at least 30% of the company’s sales in each segment can be traced back to fast-growing markets.
Like many companies, Danaher posted strong earnings growth of over 30% in the last year. But most investors aren’t expecting that kind of growth in the next few years, and that’s why DHR stock stands out.
Danaher is considered a low-volatility stock. which means it generally outperforms the market during recessions. That makes Danaher s solid choice for conservative investors looking for a “set it and forget it” stock to ride out the current volatility. At this time, analysts give DHR stock a 25% upside, so it’s one of the top choices among blue-chip stocks to buy.
Blue-Chip Stocks to Buy: AT&T (T)
Many investors fled AT&T (NYSE:T) after the company announced it would be spinning off its WarnerMedia unit. The resulting drop in the company’s dividend (although not its dividend yield) soured investor sentiment for the company’s stock.
However, as InvestorPlace contributor Cristian Docan recently pointed out to investors, this allows the company to focus on its core business. For all of the vacuous things that mobile phones allow, they play an essential role in the way we communicate with each other.
After the recent selloff, T stock appears to be reasonably valued. So the question is will the company be able to achieve a healthy amount of growth? I believe so because of a recent, and unplanned, replacement of my daughter’s mobile phone. This reminded me that mobile devices don’t always “retire” on our schedule. And when they do, they need to be replaced right away. That doesn’t leave a lot of time to contemplate switching carriers. All of this means AT&T should have no problem maintaining consumer demand.
Lockheed Martin (LMT)
Next on this list of blue-chip stocks to buy is Lockheed Martin (NYSE:LMT). The defense contractor is one of the leading suppliers to the United States government, as well as our NATO allies. Moreover, the Russian invasion of Ukraine is making these nations acutely aware of the need to provide for their own defense.
That’s one reason why Lockheed Martin reported an order backlog of $134 billion in March. However, that bodes well for future free cash flow (FCF) growth. And that has already been growing steadily for the last three years.
In turn, this means good things for growth in the LMT stock price. And even if investors don’t get an immediate payoff from that, they can collect the company’s dividend. It currently calculates to $11.20 on an annual basis with a yield of nearly 2.5%, and Lockheed Martin has raised its dividend in each of the last 20 years.
Blue-Chip Stocks to Buy: Microsoft (MSFT)
Even a company as universally appreciated as Microsoft (NASDAQ:MSFT) was not spared from the tech wreck. MSFT stock is down 20% from its all-time high reached in late December 2021. However, investors who are looking for tech stocks to buy and hold through the current volatility are likely to be rewarded by choosing Microsoft.
The company has a reach in every important market sector. Its Microsoft Teams collaborative software helped propel the company during the pandemic. But it also has secure footholds in areas like gaming, artificial intelligence, and cloud computing.
And this is evident in the company’s most recent earnings report. The company posted an 18% year-over-year (YOY) increase in revenue and a nearly 10% YOY growth in earnings per share (EPS).
The tech selloff may have further to go but it won’t last forever. So investors just need to keep it simple and buy MSFT stock on this dip.
Energy stocks are one of the hottest sectors in 2022 and Chevron (NYSE:CVX) has been one of the top performers. CVX stock is up 49% in 2022. And that’s certainly one reason that investors have been piling into the company’s stock.
But Chevron has remained a popular choice for investors even in times when oil prices are down. This illustrates what many first-time investors are learning about the value of having quality energy stocks in their portfolios. Although the stock price growth is highly cyclical, the reason for investors to own these stocks is for the relatively healthy balance sheets that allow them to add shareholder value in any economic climate.
And that fundamental strength is evident in Chevron’s dividend which currently pays out $5.68 annually which currently calculates to a 3.19% dividend yield. The company has increased the dividend payout in each of the last 35 years.
Blue-Chip Stocks to Buy: United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) is the last on this list of blue-chip stocks to buy. Like other stocks on this list, one of the best reasons to invest in UPS stock is the company’s free cash flow (FCF). The company expects to generate over $9 billion in FCF in 2022. That’s based on the company’s expectation that it will generate $102 billion of revenue this year. And that makes the company’s dividend, which is already one of the richest available even more attractive.
There are bullish and bearish opinions on UPS stock. And it’s fair to wonder how the company will fare as the e-commerce momentum slows to more sustainable levels. The company also has to deal with competition. But e-commerce isn’t the only reason that individuals need to send packages. And when it comes to shipping, prices tend to become sticky.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.