A company that is well-known and that has been established over a number of years is considered a blue-chip stock. They have been through the boom times and recessions, giving investors confidence that they will remain a viable entity in the future. Blue-chips are usually less volatile than other stocks, as they have a steadier stream of predictable income and usually have extensive ownership by institutions, which can hold shares for a longer period of time than individual investors. Blue-chips are usually the market leader in their respective sectors.
Typically, September is a volatile and tough month for stocks, but there’s a real resilience to the current stock market. Even the NASDAQ Composite is holding up well, considering Apple Inc.’s (AAPL) drop last week.
A key metric for me remains the Dow Jones Transportation Average and the components of the Dow Jones Industrial Average. Top- and bottom-line growth for blue chips is very modest, but balance sheets remain strong, and the institutional drive towards stock market safety and consistency remains a solid investment theme.
Dividends and the prospect for more dividends remain highly attractive in a slow-growth economy, and new funds for equities have to go somewhere. I see no reason why the Dow Jones Industrials can’t come through with their earnings outlooks going into the last quarter of the year.
But regardless of corporate fundamentals, the Federal Reserve has been and will continue to be the clear driver of this stock market. Institutional investors are still of the mantra that it doesn’t pay to fight the Fed and betting against it by those who get paid to play the stock market is highly unlikely.
Unless there is some new shock to the system, the stock market is likely to finish off a very good year.
If corporations are still wary about investing in new plant, equipment, and employees, the outlook for balance sheets and rising dividends remains strong. For years now, it’s been much easier for corporations to borrow cheap money and buy back shares in … Read More
I’ve always liked railroad stocks; they are the backbone of North America, and they’re very good at making money. Often in this column we consider the stock market performance of Union Pacific Corporation (NYSE/UNP). I firmly believe that this company will continue to be a winner for investors.
As part of an ongoing series in this column, we’ve been looking at some of the best long-term performers the stock market has to offer. So far, we’ve considered PepsiCo, Inc. (NYSE/PEP), Union Pacific, and Colgate-Palmolive Company (NYSE/CL). While a track record can’t tell you where a stock is going to go in the future, for me, it lends a lot of weight to making a new investment decision. What I’m trying to find are great, dividend paying stocks that investors can accumulate when they’re down. If a stock has a history of recovering strongly from periods of price weakness, this lends a lot of credibility to its story.
Looking at railroad stocks specifically, one of the best-performing companies on the stock market has been Canadian National Railway Company (NYSE/CNI), which trades on both the New York and Toronto stock exchanges. Among railroad stocks, this company’s long-term wealth creation on the stock market is unmatched. The company’s dividend yield isn’t as large as other railroad stocks, but its capital gains are very impressive. The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
This stock has basically been going straight up since the stock market correction in 2008/2009. On a split-adjusted basis, the stock was worth approximately $50.00 a share at the beginning of 2008, $20.00 a share in 2004, … Read More
I still think that the best investment strategy for a stock market investor is to keep their assets at home. The eurozone is in recession, and emerging markets are just that—emerging. Now, I’m not referring to trading where there are lots of opportunities in small-cap technology companies and U.S.-listed Chinese stocks. I’m talking about building blue chip positions for long-term wealth creation—and preservation. These are the kind of stocks that you can use to build a nest egg for retirement, or use for income while in retirement.
Previously, I featured PepsiCo, Inc. (NYSE/PEP) as the kind of blue chip company with which I think long-term investors can build a position when the stock is down. The best strategy with an investment in this kind of blue chip company is to take its dividends and reinvest them in new shares. You can do this through a dividend reinvestment plan (DRIP), and the company allows you to reinvest all or a portion of its dividends into new shares. Dividend reinvestment in a blue chip stock that has a solid track record is an excellent way for you to create wealth.
Another blue chip company that has a great track record of making money for shareholders is Colgate-Palmolive Company (NYSE/CL), which is much more than just a toothpaste business. I like this company, its products, and most importantly, its track record of wealth creation on the stock market. Pull up a long-term chart on Colgate-Palmolive, and you’ll see what I mean. This is a company that you can invest in when its share price is down. Build a position in Colgate-Palmolive over time, … Read More
There is now more evidence that companies with huge cash hoards are returning the money to shareholders, rather than making any bold new investments themselves. Last Friday, General Electric Company (NYSE/GE) announced that it would increase its quarterly dividend to $0.19 a share, up from $0.17, and it authorized an increase in the amount of shares it can repurchase to $10.0 billion by the end of 2015.
On the stock market, General Electric (GE) has been recovering pretty well, but since the financial crisis, the stock has underperformed the main stock market indices. Investors all love dividend increases, and I’m the first to applaud the company for doing so. But the return of excess cash in the form of dividends and share buybacks also represents the unwillingness of companies to make any bold new investments in its operations. It’s a very uncertain world out there, and companies aren’t willing to bet like they used too. GE’s stock market chart is below:
Chart courtesy of www.StockCharts.com
GE has been a solid dividend payer but a terrible stock market investment over the last 12 years. The company’s heyday on the stock market, it would seem, was the 20 years leading up to 2000, when the stock appreciated 58-fold, not including dividends. Today, the stock is trading today at less than half of its record high, which is not the kind of blue-chip performance you expect from such a large company. (See “Dividend Yields Going Up—the Outlook for Stocks, Not So Good.”)
Just like last quarter, there’s a very high chance of a lot more dividend hikes when fourth-quarter earnings season … Read More
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