The Case for Blue Chips

Investors have a tendency to try and get too fancy.
In our tireless efforts to always beat the market, we’re constantly searching for outside-the-box, off-the-grid, contrarian investment plays that Wall Street has “overlooked.” That’s a great way to maximize your rewards. But there’s also an inherent risk to that strategy.
Given how volatile U.S. stocks have become in the last few weeks, chances are your risk tolerance isn’t very high at the moment. So you may be on the lookout for lower-risk alternatives that have a history of weathering any market conditions.
Don’t look too far. They’re staring you right in the face.
Sometimes the best investments are the most obvious ones. These are the companies that are universally recognized, that have been growing their earnings for decades, and have been raising their dividends annually.
They are blue-chip dividend growers.
You know their names. Exxon Mobil (NYSE: XOM), Procter & Gamble (NYSE: PG), Johnson & Johnson (NYSE: JNJ), Coca-Cola (NYSE: KO) – and so on. All of those blue chips have market caps of at least $185 billion. All of them have increased their dividends annually for at least 30 straight years. All of them sport yields of at least 2.8%.
Many of you probably already own one or several of these stocks in your portfolio. And with good reason. You probably bought them years ago, and have been holding onto them without ever really thinking about selling them – even during the recession and as far back as the dot-com bubble at the turn of the century.
That doesn’t mean blue chips don’t fall along with every other stock in times of crisis. Exxon, for example, has fallen 6% in the last month, roughly in line with the drop in the S&P 500. Johnson & Johnson shares have actually fallen further than the market, down 8.6% in the past month.
But all of them have risen over time. Exxon has returned 5,000% since 1970, more than double the 2,000% return in the S&P 500 – and that doesn’t include the dividend yield. Procter & Gamble has returned 4,789% during that time (not including the dividend). Johnson & Johnson shares have shot up a whopping 9,000%.
It’s doubtful that those stocks will continue to outperform the market by such a wide margin in the coming years. Their greatest growth periods are behind them. That is, after all, how they became blue chips in the first place.
The appeal of these companies, however, is that you know they’re not about to go belly up. Their stocks aren’t likely to tank. All of them have been rising exponentially for decades. No matter how bad this correction gets, these stocks will endure over the long term.
In the meantime, even if they do fall over the short term, they all have a generous – and growing – dividend payout to fall back on. A 3% yield can cure a lot of ills. And it’s nice to have peace of mind that that yield isn’t going anywhere.
There’s value to searching high and low for overlooked, underappreciated, little-known stocks that have a chance to double in the years ahead. It’s what puts financial newsletters like ours in business. But not all of your investments need to be so complicated.
At times it’s okay to be boring or predictable as an investor. It’s a good thing to have some safe income plays in your portfolio that most other investors own.
Through good times and bad, the largest companies with the most money endure. By owning at least a few of them, so will your portfolio.

The Wall Street Journal Calls Them “Mega-Dividend Payers.”

We call them “Dividend Al Capones”. Because just like Capone, these American businesses control vast empires and generate extreme amounts of cash. These three companies are so profitable… so rich… they’re able to pay huge dividends. We’re talking big payouts of $428.57, $913.93, and $924.43! If you’d like to tap into this income stream, follow the link below to get our new report. Click here to find out how you can start collecting these big dividends.

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