As part of a well-rounded, diversified portfolio, blue-chip stocks should be a cornerstone of your investment strategy. They are large, well-established financially sound companies known for their stability, reliability, and strong performance.
Over years, even decades, blue-chips tend to provide consistent returns, even during market downturns. They are successful and profitable operations with strong management teams that recognize the value of rewarding shareholders, so they often pay dividends, providing investors with a steady stream of income.
Blue-chip stocks also tend to be less volatile compared to smaller companies, making them a safer investment choice. And because they are stable, they also have the potential for capital appreciation over time. It means they offer the opportunity to generate superior returns, but with less risk.
Overall, blue-chip stocks can enhance a diversified investment portfolio, and the three companies below are some of the bluest blue chips you should be buying.
Key Points About This Article:
- Blue-chip stocks offer investors an unbeatable combination of growth, income, reliability, and reduced risk, making them foundational investments for a portfolio.
- Here are three companies with strong fundamentals and enviable track records that can continue to produce outsized returns for investors.
- Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks“ now.
American Express (AXP)
Financial services giant American Express (NYSE:AXP) is the first blue-chip stock an investor ought to buy now. Due to its sterling brand reputation, consistent performance over many decades, and robust financials, AmEx has a long history of stability and generating exceptional returns, making it a reliable investment for your portfolio.
The company produces consistent revenue growth, driven by its premium credit card offerings and an expanding customer base. While it has always pursued a more upscale clientele, more recently it is reaching out to a younger though still affluent demographic, helping drive record new card acquisitions. It now has 24 consecutive quarters of double-digit growth in card fee revenue.
Additionally, American Express has a history of paying dividends, providing investors with a steady income stream and reflecting its commitment to shareholder returns. That was evident during the pandemic. Even though it took a hit to cash flows as the economy was largely shut down, its financial strength allowed it to maintain its payout, which currently yields 1% annually.
As a leader in the credit card industry, American Express continues to innovate its offerings, particularly in digital payments, positioning itself for future growth. It has a unique, globally-known brand of which Warren Buffett has said, “You can’t create another American Express.” The credit card company is a blue-chip stock that can provide growth, income, and stability for your portfolio.
Home Depot (HD)
As the largest home improvement retailer, Home Depot (NYSE:HD) has developed a reputation for making the broadest selection of products and materials available to DIYers and professionals alike. Its decades of market positioning translates into unrivaled brand loyalty that results in reliable returns for investors, even during economic downturns.
The company has shown impressive growth in both sales and profits, driven by a robust housing market and a growing trend of DIY home improvement projects. While not recession-proof, it tends to be resistant because when people can’t buy a new home, they turn to fixing up their existing residences.
Moreover, Home Depot has a strong commitment to returning value to shareholders through regular dividend payments and share buybacks. Management maintains its goal is to first invest in its business, then pay the dividend, “and it is our intent to return any excess cash to shareholders in the form of share repurchases.”
With its focus on improving its e-commerce platform and optimizing its supply chain, Home Depot is well-positioned to adapt to changing consumer preferences. While the DIY center paused dividend hikes during the pandemic, it quickly resumed raising the payout. It has raised the dividend at a 16% compound annual rate over the past decade, though it increased the payout only 8% this year.
Still, Home Depot is a blue-chip stock offering the potential for long-term growth that belongs in everyone’s portfolio.
Walmart (WMT)
Retail giant Walmart (NYSE:WMT) is a premiere blue chip stock that is resilient in both good times and bad. Because people need to eat regardless of economic conditions, coupled with the retailer’s commitment to everyday low prices, Walmart is an attractive investment at any time.
It benefits from significant economies of scale that appeals to a broad spectrum of customers, allowing it to generate consistent revenue growth.
Despite Amazon‘s (NASDAQ:AMZN) dominance in e-commerce, Walmart’s size, financial strength, and commitment to innovation, enabled it to challenge its rival in the online space and become the second-largest e-tailer. It might trail Amazon by a wide margin, but it remains positioned for significant future growth. That’s no small thing, considering it generates over $15 billion in annual sales.
Straddling both the physical and online shopping experience, Walmart has amassed a massive share of the retail market. WMT stock is up 53% in 2024 and its dividend yields 1% annually. The retailer makes a solid blue-chip addition to any investment portfolio.
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