There is a number of large-cap, blue-chip companies in the stock market that are actually trading right at their 52-week highs. In fact, some are trading at their all-time price highs and many of these shares aren’t overpriced.
Consider for example, Colgate-Palmolive Company (NYSE/CL), which was a favorite of mine way back when I was a stockbroker. This blue-chip company is the maker of such well-known brands as “Colgate” toothpaste, “Palmolive” dish soap, “Irish Spring” hand soap, and “Toms of Maine,” to name a few. This stock has been an enormous wealth creator over time, ignoring virtually all of the major shocks to the rest of the stock market. The stock went up substantially in the big run-up of the 1990s, went flat in 2000 for about six years, and then doubled again to its current record level of around $100.00 a share. And this doesn’t include all those quarterly dividend payments.
Then there’s Kimberley-Clark Corporation (NYSE/KMB), another blue-chip company that manufactures “Kleenex,” “Cottonelle” and “Kotex” brands, along with a ton of personal and other products that you’ve never heard of. This stock has almost doubled from the stock market low in 2009 and the company’s current dividend yield is a hefty 3.7%. Even since last summer, this position has accelerated substantially more than the broader stock market, and it is now sitting right at its all-time high of around $80.00 a share.
Finally, another blue-chip company I’d like to highlight is Kraft Foods Inc. (NYSE/KFT), which currently has a dividend yield of about three percent. This stock has basically doubled in value since 2009, which is pretty impressive for such a large-cap, mature enterprise. The position is trading right close to its 52-week high and Street analysts continue to increase their earnings estimates on the company.
All these blue-chip, brand-name companies have proven that, as a stock market investor, you can do very well owning large-cap, dividend paying stocks. (See My Favorite Benchmark Stocks That Lead the Stock Market.) And the kicker is that you can sleep a lot better at night owning such solid businesses, rather than speculating on the next high flyer. I’d take Colgate-Palmolive any day over Facebook, Inc. (NASDAQ/FB), even at its high. You’ll notice that the three companies I’ve highlighted are all consumer products businesses…and why not? In a consumer-driven marketplace like the U.S. economy, it only makes sense that these are the blue-chip businesses that you want to invest in for the long term.
In today’s stock market, investment risk is very high and it’s not because of the purchasing power of the U.S. consumer; it’s because of high U.S. and European sovereign debt. Geopolitical risk like war is always an investment risk that never seems to abate. Here’s what I’m saying: I like blue-chip consumer product companies in a consumer-driven economy. I always have and the reasons for it are just the same as Warren Buffett buying Dairy Queen. So, if you’re a long-term investor who wants to invest in the stock market and collect dividends, wait for the stock market to correct the stock price of your favorite blue-chip companies and then seriously consider a position. You certainly aren’t going to get immediate gratification from the stock market in this kind of environment, but those quarterly dividends have a way of easing the pain.