Buying blue-chip stocks is generally a smart decision. They tend to be established, profitable, name-brand companies marked by reliable growth. All of these positive factors contribute to stable share prices that tend to trend upward over time.
Buying blue-chip stocks in an emerging bull market is even better. If the economy can avoid recession, then we are likely already in the early innings of a bull market. If we enter a recession, these stocks will still be valid choices because they are likely to rebound above current prices over the long-term.
The stocks listed below have generally favorable outlooks paired with dividends, making these stocks wise investments given their dominant market positions and strong fundamentals.
|EPD||Enterprise Products Partners||$26.41|
Diageo’s (NYSE:DEO) 2022 annual report provides some compelling evidence in favor of buying the stock.
The alcoholic beverages giant increased its net sales, volume, profits, and several other metrics in 2022. Over the course of the year, the firm reported £15.45 million in revenues, a 21.4% increase on a year-over-year basis. These numbers highlight strength in certain segments, particularly with the company’s key brands such as Johnnie Walker, Tanqueray, and Guinness.
One advantage Diageo has is that it operates in a total beverage alcohol sector that has grown quickly over the last decade. Diageo is the leader in international spirits, which has grown faster than the total beverage alcohol sector. Diageo anticipates sales growth in the 7-9% range for the next three years.
The company will continue to grow its premium-tier spirits, which provide increasingly profitable growth, considering their higher margins. Diageo’s dividend which yields just under 2% is highly reliable and has increased every year since 2001.
Sonoco Products (SON)
Sonoco Products (NYSE:SON) stock isn’t one that many investors talk about often, and may not necessarily be among the top blue-chip stocks on many investors’ minds. That said, the company is a leader in its field and a solid option for investors looking for stability.
The South Carolina company provides consumer packaging materials, industrial solutions like boxboard, retail packaging, and point-of-sale displays, among other offerings.
Sonoco Products has been in business for more than 120 years and recently received a Gold Medal rating from EcoVadis, a reviewer of supply chain eco-friendliness. That puts Sonoco Products in the top 5% of 100,000 firms reviewed worldwide.
Sonoco Products’ financial performance has also been stellar. The firm exceeded the high end of guidance with $1.89 billion in sales in Q3, up 34% yearly. Additionally, operating profit increased 67% to $225 million.
Dominion Energy (D)
It is an opportune time to bet on Dominion Energy (NYSE:D) stock, a utility company providing electricity and natural gas to customers in 15 states.
In November, the company initiated a business review to identify ways to increase its flagging share price. Dominion will continue to operate as a state-regulated utility company, but also intends to pivot. The company is investing heavily in decarbonization ,which it expects to produce more robust returns, while maintaining its commitment to its dividend.
D stock slid during 2022 from $79 to $61. That kind of performance is more in line with the overall market, which was not expected from this utility company, considering investors expect utility plays to be more defensive in down markets.
Ironically, Dominion Energy saw revenues and income rise in Q3 and throughout 2022. However, the company has provided unsatisfactory returns for shareholders over the past few years. An investment in Dominion Energy today is one that could go either way. That said, I like the upside potential with such a bet at these levels.
Sanofi’s (NASDAQ:SNY) stock is underpinned by excellent recent performance, strong long-term prospects, a dividend, and a robust therapeutics pipeline. It is among the leading global blue-chip pharmaceutical firms, and should continue to perform well over the long-term.
Analysts anticipate that Sanofi’s revenues will reach approximately $49 billion in 2023. When the company next releases earnings in February, analysts expect Sanofi will report 2022 revenue slightly below $46 billion. So, Sanofi investors can see that the company has some significant forward-looking growth expected ahead.
Sanofi performed very well in Q3, bringing in €12.48 million in revenues, up 19.7% YoY. On a constant currency basis, those revenues increased at a more modest 9% during the same period.
Sanofi’s Dupixent accounted for €2.314 million in revenue during Q3, representing a 44.6% increase, even considering exchange rates. Sanofi’s hemophilia drug, efansoctocog alfa, was designated as a breakthrough therapy by the FDA and is the first drug of its type to be given that designation in the treatment of hemophilia A.
Enterprise Products Partners (EPD)
Enterprise Products Partners (NYSE:EPD) is a somewhat risky pipeline transportation stock with a significant upside.
The midstream firm has a roughly 22% upside based on the spread between its target price and current price, at the time of writing. Adding in a dividend yielding 7.6% that hasn’t been reduced since 1998, and its appeal becomes apparent.
Let’s assume that the company continues to pay the same 49 cent dividend throughout 2023. That will equate to $1.96 of dividend payments in 2023. Let’s also assume that EPD stock reaches its target price this year. That would bring the total value of a share to $33.47, resulting in a return above 30%.
Enterprise Product Partners’ fundamentals improved in Q3 but weren’t exceptional. Its pipeline volumes increased by 6.7 million barrels per day in Q3. Operating income increased from $1.513 billion to $1.712 billion during the same period. Thus, the overarching narrative surrounding EPD stock remains tied to potential returns that depend upon volume and pricing combinations.
Chinese E-Commerce firm JD.com (NASDAQ:JD) should fare well in 2023, as revenues continue to rebound after faltering in the middle of last year.
In Q2, JD.com posted 5.4% year-over-year growth based on sales registered in the Chinese Yuan. That was the slowest quarterly growth on record for the company. But in Q3, revenues jumped 11%, as some of the Covid restrictions choking economic activity were eased.
China has further lifted Covid restrictions, which should set the stage for resurgent economic activity across the populous nation, leading to rising revenues for JD.com. Analysts tracking the company believe that to be the case. They anticipate JD.com will record $177 billion in sales in 2023, up from an expected $155 billion in 2022.
JD stock has a roughly 33% upside based on the difference between its current price and target price. It retains an overwhelming ‘buy’ rating and somewhat surprisingly carries a beta of 0.43, meaning it moves with much lower price volatility than the markets.
Philip Morris (PM)
Investors could be forgiven for thinking Philip Morris (NYSE:PM) stock’s best days were behind. The company has primarily sold cigarettes, which have seen a steady sales decline over the past decade as smoking rates fall.
That said, the company is steadily divesting its cigarette holdings in favor of smokeless tobacco products. Philip Morris wants at least 50% of its sales to come from smoke-free products by 2025. It is currently on track to make that goal reality, as other traditional cigarette companies simply haven’t divested and pivoted as quickly. Other cigarette giants, including Altria (NYSE:MO) and British American Tobacco (NYSE:BTI) continue to depend on cigarettes for well above 80% of revenues.
Philip Morris controls 59% of the global smokeless tobacco market, putting it in a prime position to control the following stages of evolution in the industry. This positioning as the company with the dominant position in this highly-profitable and growing sector should provide solid returns for investors in PM stock over the long-term.
On the date of publication, Alex Sirois 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.
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