Blue-chip stocks offer more stability than most stocks. Corporations in this category are profitable, and some of them are still growing at good rates.
While the year started off strong, March was a bit slower. The S&P 500 only gained 3% during the month while it gained 5% in February. An April upswing can move blue-chip stocks higher.
It’s nice to see stocks move higher in one month, but investors should prioritize what a stock will look like after a few years. These blue-chip stocks exhibit promising signs that indicate they have more room for long-term gains.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has a steady record of outperforming the stock market and delivering gains for shareholders. The stock is up by 252% over the past five years and offers a 0.71% dividend yield.
The company’s dominance in cloud computing, artificial intelligence, and other industries has prompted many analysts to feel bullish about the stock’s long-term prospects. The average price target suggests an 11% upside. Microsoft is also rated as a “Strong Buy” among 35 analysts. The highest price target of $550 per share implies a 29% gain from current levels.
Microsoft Azure continues to gain market share in the cloud computing industry. This major catalyst grew by 24% year-over-year in Q2 FY24 and contributed to more than half of Microsoft’s total revenue. Cloud computing has also helped Microsoft expand its profit margins. That has led to a lower P/E ratio and high dividend hikes each year. The rising demand of artificial intelligence should increase Microsoft Cloud’s runway.
American Express (AXP)
American Express (NYSE:AXP) is an enticing dividend growth stock thanks to its valuation, consistent financial growth, and high-profit margins. The stock has a 20 P/E ratio and a 1.26% dividend yield. American Express recently announced a 17% dividend hike amid good financial results in the fourth quarter of 2023.
During that quarter, revenue increased by 11% year-over-year while net income jumped by 23% year-over-year. American Express also announced that it intends on generating 9% to 11% year-over-year revenue growth beyond 2026. The company also expects EPS growth rates to range in the mid-teens during the same time.
These announcements are a part of the company’s growth plan which started in January 2022. American Express generated record revenue and profits in 2023 by adding 12.2 million new cards over the past year. The number of “cards-in-force” issued exceeds 140 million. People will use their credit and debit cards during any economic cycle. American Express offers more insulation than many corporations when the economy slows down.
Deckers Outdoor (DECK)
Deckers Outdoor (NYSE:DECK) is an emerging athletic apparel brand that is stealing market share from top competitors. The company’s Hoka and Ugg brands have been a big hit with consumers. Revenue increased by 16% year-over-year in the third quarter of fiscal 2024 to reach a record $1.56 billion. The company’s fiscal 2024 revenue guidance suggests it will generate 14% more sales in fiscal 2024 compared to fiscal 2023.
The company’s profits grew by 40% year-over-year and helped Deckers Outdoor secure a 25% net profit margin. Ugg has been doing most of the work and reached $1.072 billion in revenue during the third quarter of fiscal 2024. Hola came in second with $429.3 million in revenue but is growing at a faster rate. Ugg brand net sales increased by 15.2% year-over-year while Hoka brand net sales grew by 21.9% year-over-year.
Deckers Outdoor has received more attention ever since it was added to the S&P 500. Even before its inclusion, the stock has comfortably outperformed the market by delivering a 480% gain over the past five years.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) sells essential home care and grooming products that won’t go out of style during an economic bust. The stock has only delivered a 49% gain over the past five years which is below the S&P 500’s gains during the same time period. However, this blue-chip stock doesn’t experience as much volatility.
PG stock only has a 0.43 beta compared to the S&P 500’s 1.00 beta. Beta is a measure of an investment’s volatility. While many growth investors want to forget 2022, Procter & Gamble only lost 7% of its value during that year. The company’s 2.41% dividend yield helped to offset some of those losses.
Speaking of the dividend, it’s one of the most reliable payouts in the market. Procter & Gamble has distributed dividends for 133 consecutive years. The includes 67 consecutive years of dividend hikes. Procter & Gamble has the flexibility to raise prices during inflation and reward long-term investors.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is a dominant force in the e-commerce industry. Amazon’s vast logistics network makes it easy for most people to receive any product within 1-2 days. The tech giant also has same-day shipping available at some locations.
The company has a deep moat for its online marketplace, and that competitive advantage resulted in record revenue in Q4 2023. Amazon increased its net sales by 14% year-over-year to reach $170.0 billion. Amazon grew its international revenue by 17% year-over-year while revenue from North America was up by 13% year-over-year.
Amazon also has a competitive moat with its cloud computing platform. Amazon Web Services exhibited a 13% year-over-year growth rate to reach $24.2 billion. The company is also expanding into advertising, video streaming, and artificial intelligence. These growth opportunities can result in higher revenue growth and rising profit margins. This makes it one of those blue-chip stocks to buy.
Amazon stock is up by 23% year-to-date and has plenty of fans on Wall Street. The average price target suggests a 13% upside. The stock is rated as a “Strong Buy” among 41 analysts.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is another blue-chip stock to consider after the social media giant has rented its focus on rising profit margins. Analysts have cheered on the company’s recent results and currently view the company as a “Strong Buy.” The highest price target of $609 per share suggests a 16% upside from the current price.
The stock has been getting more attention due to its recent dividend. Meta Platforms announced its first dividend in the fourth quarter of 2023. The company also reported 25% year-over-year revenue growth and 201% year-over-year net income growth in that quarter. The dividend was the icing on the cake.
Many advertisers flock to Meta Platforms to reach more of their potential customers. The company has a comfortable lead over other social networks. A TikTok ban would push Meta Platforms higher up on its pedestal. Meta Platforms doesn’t need a controversial TikTok ban to gain market share, but it is a catalysts that investors should monitor.
Visa (V)
Visa (NYSE:V) offers stability since many people will use credit and debit cards during various economic cycles. These plastic cards are more convenient than carrying around spare change and can also help with credit building (credit cards only) and have enticing rewards programs.
You aren’t earning 2% cashback if you use paper cash for your purchases, and credit cards let you access money that you currently don’t have. These financial products can put you into a lot of debt, but they are useful for many people.
Visa has been using this formula to deliver impressive returns for shareholders. The stock has gained 7% year-to-date and is up by 74% over the past five years. Visa also has a 0.75% dividend yield and has a compounded annual growth rate of 18.18% over the past five years. The stock only has a 21.50% dividend payout ratio, which suggests it has plenty of room to increase its distributions.
The fintech company also boasts solid financials. Visa reported 9% year-over-year revenue growth and 17% year-over-year GAAP net income growth in the first quarter of fiscal 2024. It’s one of those blue-chip stocks to consider.
On this date of publication, Marc Guberti held long positions in MSFT, DECK, and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
