The stock market is in turmoil, and investors are gravitating toward less risky investments. Growth stocks, in particular, have been pulverized by the market. However, the best blue-chip stocks to buy are an attractive option for investors to limit their downside risk and gain big over the long term.
Blue-chip stocks belong to companies that boast an excellent track record in terms of fundamentals and market returns. These companies are fundamentally sound and have well-established businesses which often offer dependable earnings. Moreover, these companies may also provide dividends, adding to their attractiveness.
However, one of the main problems with blue-chip stocks is that they often trade at lofty valuations, which aren’t within reach of the average investor. With the market bear run at this time, there are plenty of blue-chip stocks that could be scooped up and diversify your portfolio.
|CSCO||Cisco Systems, Inc.||$45.57|
Blue-Chip Stocks to Buy: AT&T (T)
U.S. telecom giant AT&T (NYSE:T) has had it incredibly tough in getting investors behind its stock. After spinning off its media-related assets into Warner Bros. Discovery (NASDAQ:WBD), it has gone from being a telecom operator to a media conglomerate to a telecom operator.
AT&T’s recent efforts have allowed the company to effectively unlock cash flow to pay down debt. Management expects to produce close to $20 billion in annualized free cash flows, and roughly 40% of that will accrue to dividends. The rest will be used to pay down its sizeable debt load. AT&T boasts a tremendous dividend yield of 5.2%.
5G and fiber markets will be a key growth driver for the business. Its fiber penetration rate came in at a tremendous 37%, with close to 691,000 net additions during the first quarter. The firm plans to invest $24 billion into its 5G and fiber capabilities this year and 2023. The demand for bandwidth will increase exponentially in the coming years, and the pandemic has accelerated the trend.
Volkswagen (OTCMKTS:VWAGY) is one of the leading carmakers in the world by volume. The German automotive giant has realized that the future of transport is electric, and the firm is investing heavily in its electrification plans. The automaker will look to invest 100 billion euros in electrification technologies in the next five years. It plans to have 20% of its total vehicle sales to be electric within the next three years. Last year, roughly 5.1% of its sales were battery electric vehicles.
The carmaker is raising its expected capital investments to 52 billion euros to achieve its goals. These investments will help achieve a capacity of 3.5 million units by 2026. If Volkswagen can nail its EV-related milestones in the coming years, it could become a major player in the sector.
Norwegian energy giant Equinor (NYSE:EQNR) has struggled in the past decade due to the misalignment between shareholder and management interests. However, after its strategic reforms in 2016, the oil and gas giant has performed remarkably well, growing revenues and net income by 97.8% and 396.5%, respectively.
The company is scaling its asset base to pursue a more lucrative energy transition program in which it expects to be a leader. The major chunk of its long-term capital investments is expanding its offshore wind energy project. We are seeing how renewable energy costs are falling and, in some cases, are comparable to fossil fuels. Offshore wind energy is a relatively new industry niche that has the potential to blow up over the next few years.
Blue-Chip Stocks to Buy: Intel (INTC)
Intel (NASDAQ:INTC) is one of the top dogs in the client CPU and server space. It holds over 70% market share in both segments, and though its primary competition in Advanced Micro Devices (NASDAQ:AMD) has been a thorn in its side, the future points to an Intel win.
Intel Alder Lake CPUs have been a massive success and will follow more powerful processors soon with Raptor and Meteor Lakes. Moreover, it plans to make a statement with the server CPU market with its latest Sapphire Rapid processors, likely to be based on a 7-nanometer process, far superior to AMD’s 5-nms.
The chip giant expects to grow revenues by 10% to 12% by 2026 and forecasts a gross margin of 54% to 58%. Additionally, INTC stock offers an attractive dividend yield of 3.3% with eight years of growth.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is a leading network device maker, operating a growing business over the past several years. Moreover, it has over $10 billion in cash equivalents and $14 billion in free cash flows. Also, it boasts 10 years of growing dividend payouts with a 3.4% yield and a payout ratio of over 40%.
The tech giant’s growth is closely tied to the internet’s growth, specifically its burgeoning verticals like cloud computing. The cloud sector alone could grow by 16.3% to $947.3 billion by 2026.
CSCO is a capital-light business, so its free cash flow and earnings yield have risen considerably. It generates 5% sales growth outside the pandemic and over 5% net income and free cash flow.
Pharma giant Bayer (OTCMKTS:BAYRY) has been in resurgent mode over the past year, generating strong top and bottom-line results. Three of its leading products contribute more than 1 billion euros in revenues. Moreover, it plans to invest 2 billion euros in bolstering its drug production to develop several new blockbusters. For instance, its newly released prostate cancer drug made a massive 219 million euros in sales.
Bayer reported stellar fiscal 2021 results. Revenues shot up to 44 billion euros, a healthy 6.5% bump from the prior-year period. The enterprise expects sales to rise 4% to 46 billion euros. Additionally, core earnings per share will increase roughly 7.5% on a year-over-year basis this year.
Blue-Chip Stocks to Buy: Unilever (UL)
Unilever (NYSE:UL) is a consumer goods giant with a rock-solid brand portfolio with robust pricing power. Due to rampant inflation and geopolitical issues, its stock has been taking a hammering of late. Investors seem to be spooked by the current economic headwinds and have unfairly punished UL stock.
The market is concerned over the company’s exposure to Russia which is an ill-founded assumption. Its business in Russia represents just 1% of its total sales. It has the leverage and brand equity to tackle the inflationary pressures and maintain strong margin and sales growth. Also, the stock trades at historically low valuations and offers a spectacular 4.34% dividend yield. Hence, UL stock is ripe for picking.
On the date of publication, Muslim Farooque 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.