7 Blue-Chip Stocks to Buy on the Dip: April 2024


  • CVS Health (CVS): Turnaround efforts could result in a big rerating down the road for low-priced blue-chip CVS.
  • Hershey (HSY): High cocoa prices have affected HSY stock, creating a buying opportunity for new investors.
  • Johnson & Johnson (JNJ): JNJ may rebound after talc-related lawsuits are resolved.
  • Keep reading for more blue-chip stocks to buy on the dip!
Blue-Chip Stocks to Buy on the Dip - 7 Blue-Chip Stocks to Buy on the Dip: April 2024

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Recent market volatility may have many market participants buying major tech stocks on the dip, but the genuine opportunity may lie with blue-chip stocks to buy on the dip. Blue chips can be a great cornerstone for your portfolio.

Representing ownership in venerable companies with consistent cash flow, blue chips typically experience steady price appreciation. Couple that with consistent dividends and dividend growth, and the total returns from such stocks can be quite solid.

Yes, it’s not only market turbulence that has knocked down many blue-chip stocks over the past few months. Company-specific factors have played a role as well. However, in many such cases, these headwinds are temporary and have become overly priced into shares.

With this in mind, let’s dive in, and see why the following seven blue-chip stocks to buy on the dip this month offer the opportunity to buy high-quality at a more-than-reasonable price.

Blue-Chip Stocks to Buy on the Dip: CVS Health (CVS)

The logo for CVS Pharmacy is displayed on a retail storefront.
Source: Shutterstock

CVS Health (NYSE:CVS) is best known for its chain of pharmacies. However, the company is a diversified health care provider, owning other health services businesses like insurer Aetna.

There are positives to this vertical integration, but for now, these are being outweighed by big negatives. Sector-wide, costs are rising faster than revenue, putting the squeeze on profitability.

Following the release of the latest Medicare Advantage plan increases, the market believes this headwind is worsening for CVS stock. However, that may not actually be the case.

As Seeking Alpha commentator Envision Research recently argued, investors are overestimating how much the MA news affects future results. As I pointed out back in February, CVS is currently implementing a sweeping turnaround plan.

Representing good value, at just 8.3 times forward earnings and a dividend yield of 3.88%, improved results could eventually lead to a massive rerating for shares.

Hershey (HSY)

Hershey's milk chocolate pieces on a white plate on top of a wooden table
Source: shutterstock.com/VG Foto

Hershey (NYSE:HSY) is another example of blue-chip stocks to buy on the dip where short-term pain could be the prelude to big-time gains.

This leading confectionary company has been materially affected by the big jump in cocoa prices.

Fearful of the impact of this price shock on profitability, the market has bid down HSY stock in a big way. Shares trade at multiyear lows. Yet while that’s been bad news for existing shareholders, as I recently argued, for new shareholders, this could be a “can’t miss” opportunity.

Why? For one, at just 19.4 times forward earnings, Hershey trades well below its historic price-to-earnings multiple. Not only that but with this big price decline, HSY’s forward dividend yield of 2.93% is pretty high for a blue chip. Once this major headwind passes, HSY will likely surge back toward prior price levels.

Blue-Chip Stocks to Buy on the Dip: Johnson & Johnson (JNJ)

jnj healthcare stocks
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Last May, it may have seemed as if Johnson & Johnson’s (NYSE:JNJ) many years of sideways price performance were ending. That’s when the diversified drug and medical device company spun-off its slower growing Kenvue (NYSE:KVUE) unit.

But while the company’s fiscal results have beat expectations in recent quarters, JNJ stock has been under pressure, do to another perceived negative. That would be the company’s billions in potential legal liabilities stemming from its past sale of talc-based products.

However, the company continues to pursue a broad resolution to this long-standing issue. Already knocked lower by talc-related concerns, any bit of positive news regarding this may drive a big rally for the stock.

Currently, JNJ trades for only 14 times forward earnings. Historically, shares have traded at a valuation in the high-teens/low-20s. This “dividend king” also sports a 3.32% forward yield.

Lowe’s (LOW)

the front of a Lowe's store
Source: Helen89 / Shutterstock.com

Between October and March, Lowe’s (NYSE:LOW) was on a tear. Shares in the home improvement retailer zoomed from the low-$180s up to $262.49 per share. Unfortunately, this hot run has come to an end. Over the past month, LOW has dropped by double-digits.

However, this sell-off has arguably made LOW stock one of the blue-chip stocks to buy on the dip. Although Lowes’ latest guidance disappointed investors, this slump may prove temporary.

Per forecasts, after declining this fiscal year (ending January 2025), earnings are expected to grow by around 10% during the following two fiscal years.

A big reason behind this is the company’s aggressive repurchasing of its own shares. These could in time provide a steady boost for shares.

For long-term investors, keep in mind that 1.88%-yielding LOW is another of the “dividend kings,” with 60 years of consecutive dividend growth.

Blue-Chip Stocks to Buy on the Dip: McDonald’s (MCD)

McDonald's golden arches
Source: Vytautas Kielaitis / Shutterstock

Look at recent headlines about the “Golden Arches,” and it’s clear why McDonald’s (NYSE:MCD) stock has been under pressure. There’s been a lot of attention paid to the fact that this fast food chain has raised menu prices considerably over the past decade.

These headlines underscore a key concern: high prices are leading to reduced demand from low-income consumers.

However, investors may be overestimating the long-term impact of this supposed demand destruction. Much like in prior slumps, McDonald’s is making big product changes to win back customers.

Analysts still expect McDonald’s to report steady earnings growth in 2025 and 2026. Since the recent pullback may not last long, you may want to consider buying MCD stock after this recent dip.

Besides appreciation potential, MCD is a “dividend aristocrat” that has increased its payout by an average of 8% annually over the past five years.

UnitedHealth Group (UNH)

The UnitedHealth (UNH) headquarters in Minnetonka, Minnesota.
Source: Ken Wolter / Shutterstock.com

In recent months, UnitedHealth Group (NYSE:UNH) has been affected by both a major cyberattack, as well an antitrust investigation from the U.S. Department of Justice.

The health services giant is still dealing with the fallout from the cyberattack. It’s unclear whether the DOJ’s investigation will lead to an antitrust suit.

However, after sliding lower last winter, UNH stock has started to bounce back. In large part thanks to strong quarterly results. While bad from a PR standpoint, the cyberattack has clearly not affected fiscal results.

Although the antitrust risk looms, this may be more than accounted for in UNH’s valuation of 17.8 times forward earnings.

That’s a bargain valuation, when you consider that forecasts still call for continued double-digit earnings growth in the coming years. With all of this in mind, consider UNH one of the blue-chip stocks to buy on the dip.

Blue-Chip Stocks to Buy on the Dip: Visa (V)

several Visa branded credit cards
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Over the past month, Visa (NYSE:V) shares have pulled back, albeit slightly.

Besides market volatility, news of the credit card processor and its rival, Mastercard (NYSE:MA), agreeing to reduce merchant swipe fees as part of a legal settlement may be driving these declines.

However, this may not any sort of crushing blow for the company, or for V stock, going forward. As Mizuho’s Dan Dolev argued following the swipe fee settlement news, this settlement could prove to be a positive, as it could help lessen regulatory pressure.

On a longer time frame, what remains most important is that global payment trends remain favorable. As I’ve pointed out before, in the coming decades, trillions worth of annual transactions are set to move from cash to cashless methods.

This trend will likely sustain elevated growth for Visa. Hence, V remains one of the best blue chips to buy and hold.

On the date of publication, Thomas Niel did not hold (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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/7-blue-chip-stocks-to-buy-on-the-dip-april-2024/.

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