Learn the secrets of top blue chip stock investors
- (1:00) – Average Joe Investors with Big Winners: Secrets to a Million Dollar Portfolio
- (9:50) – Stocks to keep on your radar: blue chip investments
- (25:20) – Episode recap: CAT, FAST, MCD, XOM, CVX, AVGO, CSCO, PAYX, R, WHR
- [email protected]
Welcome to episode 302 of the Zacks Market Edge podcast.
Each week, Zacks host and equity strategist Tracey Ryniec will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how they impact your life.
This week, Tracey is going to speak solo about the secrets of great blue-chip stock investors.
She doesn’t talk about professional investors like Warren Buffett, Cathie Wood or Peter Lynch.
No, they are regular family investors who have decided to invest in blue-chip, dividend-paying stocks for the long term.
They took small amounts of money and turned them into big portfolios of stocks.
How did they do it?
And could you do it too?
The Secrets of Prime Investors
1. Buy blue chips that pay dividends. Usually, blue chips are S&P 500 companies, or larger capitalization companies, that have been in business for a while. They are often considered “boring”.
2. Diversify your portfolio. Ronald Read, a former Vermont janitor and gas station attendant who died in 2014 at age 92 after amassing an $8 million stock portfolio, had 95 stocks in his portfolio. But you don’t have to have that many. From 10 to 20, you will get diversity.
3. You don’t have to own tech companies. Many blue chip investors ignore the sector because many companies do not pay dividends.
4. Dividend yields are part of the strategy. Some of the blue chip investors are using the money paid out by the dividend payers to buy more stocks for their portfolio, instead of just buying more shares of the stocks they already own.
Screening for Blue Chip Stocks with Dividends
There is no way to filter out the “blue-chip” part we want.
You can look for Zacks rankings of #1 (strong buy) and #2 (buy) to get rising earnings estimates.
Selecting stocks paying a yield above 2% should also yield more large-cap stocks than small ones, as they tend to pay more dividends.
5 blue chip stocks with dividends
1. Broadcom AVGO
Broadcom, the semiconductor giant, fits the definition of blue-chip with a market capitalization of $242 billion.
Broadcom is paying a handsome dividend to the tech industry, with a 2.8% yield.
Shares have fallen about 10% year-to-date, making Broadcom more attractive to value investors.
Broadcom is now trading with a forward P/E of 17.8.
Is Broadcom a company to own for the long term even though it is in a cyclical industry?
2. Cisco CSCO
Cisco is considered old technology, as it was one of the “tech titans” that dominated in the 1990s.
Shares are down 13% year-to-date, dropping Cisco’s leading P/E to just 16.
For years, Cisco didn’t pay a dividend, but it does now and it pays 2.7%.
Is Cisco a blue chip to hide in in a volatile market?
3. Payment PAYX
Paychex provides solutions for human resources, including payroll, benefits and insurance.
With a market cap of $43 billion, it’s big enough to be a blue chip stock.
Paychex shares have fallen around 12% year-to-date, but even in hindsight they are still trading at 33 times forward estimates.
Paychex pays a dividend of 2.2%.
Should Paychex be on your blue chip list?
4. Ryder Systems, Inc. R
Ryder operates a logistics and transportation business. It’s the smallest of the companies, with a market capitalization of just $3.8 billion.
But as stocks have fallen 12% this year, Ryder has become cheaper. It sports a front P/E of just 7.8.
Ryder is also shareholder friendly, with a 3.3% dividend.
Is Ryder being overlooked by blue chip investors?
5. Whirlpool Corp. WHR
Whirlpool, the home appliance maker, has a market capitalization of $12 billion.
Shares have fallen 14% since the start of the year on concerns about a slowdown in the housing market and home renovations.
Whirlpool is trading with a forward P/E of just 7.2 as the street thinks this could be “maximum” profit.
Whirlpool pays a dividend of 2.8%.
Should blue chip investors keep Whirlpool on their shortlist?
What else should you know about the secrets of big blue chip investors?
Tune into this week’s podcast to find out.
5 shares ready to double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations climbed +143.0%, +175.9%, +498 .3% and +673.0%.
Most of the stocks in this report fly under the radar on Wall Street, which provides a great opportunity to get in on the ground floor.
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