Blue Chip
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.
This Old Economy Stock’s a Moneymaking Winner
By Mitchell Clark, B.Comm. for Profit Confidential
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
Going Large-Cap for Capital Gains? Yep, and It Works
By Mitchell Clark, B.Comm. for Profit Confidential
Back in April of 2012, oil and gas giant ConocoPhillips (NYSE/COP) created spin-off Phillips 66 (NYSE/PSX) from its downstream energy assets. In the energy business, the term “downstream assets” refers to refining and marketing. For every two shares held in ConocoPhillips, shareholders received one free share of Phillips 66. It was a great bonus for shareholders, and it’s a gift that keeps on giving. Phillips 66 listed on the stock market around $34.00 a share last April; now it’s at $52.00, and the stock pays a dividend.
Every once in a while, the stock market offers up a bonus like this one. A big company sells off or splits up its different businesses, and this can create a lot more wealth for shareholders. The former Kraft Foods Inc. recently did this, and now shareholders have two dividend paying businesses to contend with. Many investment banks and consulting firms advise big corporations to do this, but not only because of the great fees spin-offs create; the whole idea is to let the stock market decide what individual businesses are worth, because in a conglomerate, it’s difficult to place a value on any one division.The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
I was a stockbroker in the late 1990s, and that was a time when the stock market was roaring. The trading action was so good, day trading was a cinch. I saw all kinds of stocks fly high and then crash. I saw all kinds of initial public offerings (IPOs) hit the market and then crash in value. When the bubble was really building, people off the … Read More
How to Use Blue Chips for Capital Gains
By Mitchell Clark, B.Comm. for Profit Confidential
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
Dividends Going Up Because Companies Don’t Want to Invest
By Mitchell Clark, B.Comm. for Profit Confidential
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
A Top Stock with Increasing Dividends and Record Profits
By Mitchell Clark, B.Comm. for Profit Confidential
It’s pretty clear that investors have stepped away from the stock market, either sitting on the sidelines or not participating at all in new positions. This market looks tired, directionless, and generally displeased with the current state of things. The earnings picture is modest, but corporate balance sheets are strong. There’s the potential for a new business cycle, but a lot of things have to change in order for this to happen. It’s low and slow for the foreseeable future.
As part of a series in this column, I’d like to highlight an “old economy” company that’s proven to be a solid wealth creator on the stock market. This company has a history of increasing dividends to shareholders (one recent dividend increase was huge), as well as generating solid earnings growth and a track record on the stock market that’s very admirable.
Union Pacific Corporation (NYSE/UNP) is one of the top railroad operators in North America. With a stock market capitalization of approximately $60.0 billion, the company operates in 23 states, mostly in the Western half of the U.S.
As a stock, Union Pacific (UP) has mostly gone upward in value throughout its history. There was quite a long period between 1993 and 2005 when the position was flat on the stock market. Investors just weren’t interested in dividend paying stocks; they wanted technology companies. But with rising earnings and dividends, UP recovered on the stock market after every major pullback and is currently trading right near its all-time high. The company’s recent stock chart is below:
Chart courtesy of www.StockCharts.com
Not surprisingly, one of the best buying … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"
