Want a Stock Hitting a Record High? Bring on the Dish Soap

Stock Hitting a Record HighThere are still all sorts of blue chips trading right at their 52-week highs; some are trading at their all-time highs. And the best part about this is that these companies are not expensively priced on the stock market.

Colgate-Palmolive Company (NYSE/CL) is one of the blue chips having an outstanding year on the stock market. This stock just hit an all-time record high of $109.84 (split adjusted), up from approximately $75.00 a share two years ago. You wouldn’t think that the dish soap and toothpaste business would be so robust, but it is for this company. Colgate-Palmolive owns and sells a lot of brands; the company even sells pet food. It’s one of those blue chips proving to be excellent long-term wealth creators for income-seeking investors. After a major correction, this company would be very attractive for new investors. The company’s stock chart is below:

Colgate-Palmolive Chart

Chart courtesy of www.StockCharts.com


From my perspective, a stock market investor can do equally well, if not better, picking stocks among dividend-paying blue chips, especially in the age of austerity and slow economic growth. Large-cap companies have the power, money, and diversified assets to withstand the business cycle much better than small companies; if business is slow, all they have to do to keep shareholders happy is increase their dividends and/or share buybacks. (See “The Best Stocks for New Buyers.”) The kind of stock market we have today definitely favors large-caps.

Investment returns from dividend-paying blue chips compound, of course, if the stockholder reinvests dividend payments into new shares. As we know, lots of blue chips offer commission-free dividend-reinvestment plans. With the stock market trading around a five-year high, I’m not enthusiastic about taking on new positions unless we get a material price correction. Like I say, many blue chips are still reasonably priced on the stock market, but it’s tough to be a buyer when a position is hitting new all-time highs.

Kimberly-Clark Corporation (NYSE/KMB) is another company trading around its all-time high with a current dividend yield of 3.5%. This company has an approximate price-to-earnings ratio of 19, and its earnings are expected to grow about seven percent this year. The company’s stock chart is below:

Kimberly Clark Corp Chart

Chart courtesy of www.StockCharts.com

The sky definitely isn’t falling with so many blue chips trading at their highs. And given valuations, you could argue that all this stock market needs are “maintenance” earnings—earnings that just meet expectations.

There are a lot of problems to deal with next year and a lot of risks for investors. But looking at the numbers, corporations are seemingly doing their part, and that’s why the next big correction on the stock market will likely be an excellent buying opportunity for the next business cycle.