Now is a great time to invest in cheap blue-chip stocks. One of the key reasons for that is that blue-chips tend to do well even when overall markets are excessively volatile. Also, since many blue-chip stocks pay a dividend investors can be rewarded while they wait for the market to turn around. In fact, here are three cheap blue-chip stocks that make sense to put in your portfolio right now.
| PFE | Pfizer | $41.47 |
| CALM | Cal-Maine Foods | $56.08 |
| OXY | Occidental Petroleum | $64.77 |
Pfizer (PFE)
Pfizer (NYSE:PFE) is down 22% over the last year. That’s thanks, in part, to declining demand for its Comirnaty vaccine. If estimates are correct, Pfizer will generate approximately $69 billion in earnings in 2023. That’s about a 30% decline from its revenue in 2022.
However, it’s also up from approximately $40 billion in 2020. That kind of growth doesn’t appear to be priced into the stock. And so far, investors remain lukewarm on Pfizer’s $43 billion acquisition of Seagen. This will further entrench Pfizer in the oncology sector, which is the largest growth driver in global medicine.
The payoff will take several years. But with a stock that’s trading at just 7.8x earnings and pays a dividend with a yield of just under 4% that it has been increasing for 12 consecutive years. It’s possible that the company may have to slow its dividend growth because of the Seagen acquisition, but outside of that, now is a good time to start accumulating shares of PFE stock.
Cal-Maine Foods (CALM)
Analysts are cool on Cal-Maine Foods (NASDAQ:CALM). At the time of this writing, analysts are only giving CALM stock about an 8% upside from its closing price on April 12.. That’s likely because it appears that egg prices are easing.
I’ll admit that I thought the “eggs-ploitation” of egg prices was a little overdone. I’m not denying that egg prices were high. I do the shopping for my family. But the reason was known, a highly pathogenic avian influenza outbreak (HPAI) that put the hen population at historically low levels. But, for now, the outbreak appears to be under control.
It’s possible that CALM stock could see some pullback. Institutional investors plowed into the stock as revenue and earnings were soaring sequentially and year-over-year. It’s possible that the “smart money” will start to pull back as the company’s revenue and earnings are likely to take a hit as egg prices return to normal levels.
Buf if the CPI is any indication, that’s still a long time off. And with CALM stock trading at around 3.4x earnings with a dividend that has a yield of over 9%, now may be an “egg-celent” time to take a position.
Occidental Petroleum (OXY)
Ever since OPEC announced it was cutting oil production starting in May, crude oil has been on the rise. This has given a second wind to oil stocks that were starting to lose steam after a record-setting 2022. There are many cheap blue-chip stocks to choose from, but I’ll take Occidental Petroleum (NYSE:OXY).
As many investors know, OXY is a favorite of Warren Buffett. Buffett purchased nearly 5.8 million additional shares of OXY stock in March. At the time he paid between $59.85 and $61.90. The stock is currently trading at over $64 a share and it will only go higher as oil prices continue to increase. In fact, it’s not unreasonable to believe we’ll see $100 oil sometime this year.
As a dividend stock, Occidental isn’t particularly impressive right now. The company slashed its dividend at the onset of the pandemic. But it’s been increasing it in the two years since. And that streak will be in no danger with rising oil prices and the company’s ability to generate over $13 billion in free cash flow in 2022. And being able to buy shares for just 5.2x earnings, could make OXY stock a steal among oil stocks.
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.
