Is Bigger Better?
Coca-Cola, McDonald’s, Wal-Mart, Procter & Gamble...Millions of Americans purchase their products every week. But is it smart to buy their stock? A lot of investors certainly think so. The Dow Jones Industrial Average index, which tracks 30 of the biggest blue-chips, has boasted 20 percent returns so far this year and around 8 percent over the past 10 years. So, what’s the appeal?
For one: security. A blue-chip stock gives you equity in a large, reputable and financially sound company with a long history. Their stocks are attractive not only because of their familiarity, but because they tend to be less volatile and have a record of paying stable or rising dividends (read:extra money in your pocket) for years, if not decades.
They can also be cheaper and easier to buy than some other stocks, since many blue-chip companies allow you to purchase shares directly without having to open a brokerage account through what is called a “direct stock purchase plan.” (You can learn more about these plans and search for participating companies here.) Another option is to buy a blue-chip ETF in a brokerage account, which allows you to invest in a multitude of blue-chip stocks for as little as 0.07 percent in one purchase. (Check out your ETF options here.)
To help simplify the world of blue-chip investing, we’ve highlighted 10 popular, widely held stocks and included information on how much they cost, what their current dividend yield is, and why you might want to own them too. Remember, all investing comes with risk and blue-chip stocks can still lose significant value, so make sure you supplement them and diversify your portfolio.
Happy Meals and happy investors. McDonald's remains resilient despite increasing quick-service restaurant competition, thanks to unrivaled scale advantages, an incredibly strong brand, a cohesive franchisee system, and ample international growth opportunities. The Golden Arches dominates market position in almost every country in which it operates and is making widespread efforts to reinvigorate its brand and customer experience through exterior and interior redesign, engaging marketing campaigns, broader and healthier menu options, extended hours and free wireless Internet access.
- 52-week price range: $83.31-$103.70
- Year-to-date return: 11.33%
- 10-year return: 18.35%
- Dividend yield: 3.11%
- Similar options: Starbucks (SBUX), Yum Brands (YUM)
Coca-Cola is the world’s biggest nonalcoholic beverage company and is consistently rated as one of the most valuable and recognized brands in history. The company’s core brands include Coke, Diet Coke, Sprite, Dasani, Powerade and Minute Maid. Owners of the stock get to enjoy its consistent profits, despite the decline in soda consumption in the U.S. The company’s revenue and operating profit is mainly generated by international sales -- thanks to a distribution network that spans 200 countries -- and increasing demand in emerging markets is fueling its continued growth.
- 52-week price range: $35.58-$81.33
- Year-to-date return: 14.26%
- 10-year return: 7.78%
- Dividend yield: 2.62%
- Similar options: Nestle (NSRGY), Anheuser-Busch Inbev (BUD), PepsiCo (PEP)
Wal-Mart is the biggest retailer in the world, with over $400 billion in annual revenue and fast approaching 10,000 stores across the globe. The company mainly operates supercenters and wholesale warehouse clubs. Their low-cost and “one-stop shopping” business model keeps Wal-Mart popular in good economic times and bad. And despite concerns over e-commerce and dollar store competition, their commitment to consistently low prices and investments in expanded Internet marketing should pay off in the long run. They also plan to accelerate their opening of smaller, “neighborhood market” stores which will allow them to more easily compete in the top 15 metropolitan markets where real estate constraints make it difficult and more costly to open large supercenters.
- 52-week price range: $67.37-$79.96
- Year-to-date return: 16.03%
- 10-year return: 4.73%
- Dividend yield: 2.22%
- Similar options: Home Depot (HD), Costco Wholesale (COST), Target (TGT)
General Electric (GE)
More than just a utility company, General Electric provides global services ranging from aircraft engines, power generation, water processing and household appliances to medical imaging, business and consumer financing, media content and industrial products. Despite a rough year in 2008 (when the stock lost over 50 percent of its value!), GE has managed to rebound and stay competitive after nearly 130 years in business by shifting its priorities along with the world’s. It is living up to its motto, “Imagination at work,” and is now heavily focused on clean-energy products, such as wind and gas turbines. Additionally, recent developments in their solar business make it likely that GE will be able to compete directly with solar industry giants over the next decade.
- 52-week price range: $19.87-$24.95
- Year-to-date return: 18.20%
- 10-year return: 1.78%
- Dividend yield: 3.01%
- Similar options: Siemens (SI), 3M (MMM), Caterpillar (CAT)
Procter & Gamble (PG)
Procter & Gamble is the world’s largest consumer-products manufacturer, with a lineup of famous brands that you likely use on a regular basis including Tide, Charmin, Pantene, Crest and Cover Girl. Analysts continue to regard P&G as a sound long-term investment because of the company’s global scale and unprecedented brand reach, despite concerns about the need for more product innovation and improved marketing. Positive indicators include growing international sales that have helped the company reduce its tax rate and a restructuring effort to cut operational costs by $10 billion over the next several years.
- 52-week price range: $63.24-$82.54
- Year-to-date return: 20.84%
- 10-year return: 7.92%
- Dividend yield: 2.90%
- Similar options: Unilever (UL), L’Oreal (LRLCY), Colgate-Palmolive (CL)
Microsoft Corporation is engaged in developing, manufacturing, licensing and supporting a range of software products, services and entertainment, and device hardware products. And while many have targeted the company as a technology giant in decline, others believe that they are poised for growth with a new cohesive strategy and more product innovation in the pipeline. Microsoft has been very popular among those looking for technology sector bargains, and with its strong performance this year, it has certainly paid off for those value investors. The company is also popular with income investors who appreciate the regular stream of dividend payments.
- 52-week price range: $26.26-$36.43
- Year-to-date return: 21.38%
- 10-year return: 4.73%
- Dividend yield: 2.78%
- Similar options: International Business Machines (IBM), Apple (AAPL), Hewlett-Packard (HPQ)
AT&T, through its subsidiaries and affiliates, provides wireless and wireline telecommunications services in the United States and internationally. AT&T has direct access to and established relationships with millions of residential and business customers. The firm's network upgrade plans should enable it to offer these customers more and better services, driving revenue growth without costing the company too much. Along with Verizon, AT&T is a leader in the wireless market, but unlike Verizon, AT&T owns all of its wireless subsidiaries, giving it an advantage. Additionally, their Internet service customer base is among the largest of all providers and those customers tend to be loyal and bundle other services. Growth investors may not love the returns, but income investors definitely love the yield on this one!
- 52-week price range: $32.71-$39.00
- Year-to-date return: 9.02%
- 10-year return: 8.11%
- Dividend yield: 5.06%
- Similar options: Verizon Communications (VZ), Vodafone (VOD)
Walt Disney (DIS)
Mickey Mouse might be the first thing that comes to mind, but the Walt Disney Company is a lot more than that. It is actually a diversified, global entertainment company with operations in five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive. It also owns ESPN and the animation company Pixar. Although the movie industry can be hit-or-miss, Disney's large library of family favorites reduces this volatility. And while vacations to Disney theme parks are not so popular during economic recessions, their cyclical nature help make the company a sound long-term investment.
- 52-week price range: $46.53-$67.89
- Year-to-date return: 29.83%
- 10-year return: 12.63%
- Dividend yield: 1.16%
- Similar options: Comcast (CMCSA), Time Warner (TWX), Viacom (VIA)
Wells Fargo & Co (WFC)
Wells Fargo provides financial services through subsidiaries engaged in various businesses, but mainly wholesale and mortgage banking, consumer and commercial finance, and equipment leasing. Wells Fargo is one of the nation’s four largest banks, thanks to its 2008 acquisition of Wachovia. It has $1.3 trillion in assets and 6,600 offices nationwide. Wells Fargo has benefitted from a revival in the mortgage market as well as strong growth in their wealth management and brokerage services. Many analysts consider it a standout from its peers due to its long history of top-notch management and relatively simple business model.
- 52-week price range: $31.25-$44.78
- Year-to-date return: 31.25%
- 10-year return: 7.47%
- Dividend yield: 2.23%
- Similar options: JPMorgan Chase & Co (JPM), HSBC (HBC), Citigroup (C)
Johnson & Johnson (JNJ)
Johnson & Johnson ranks as the world’s biggest and most diverse health-care company. The company comprises three divisions: pharmaceutical, medical devices and diagnostics, and consumer products. J&J controls the No. 1 or 2 spot in the majority of its products and as the baby boom generation ages, the demand for all of J&J’s offerings will increase, along with the company’s profits. It makes sense that this stock is a popular defensive holding amongst investors during economic downturns. Additionally, its strong research and development efforts are minimizing concerns over past and potential drug patent losses.
- 52-week price range: $66.85-$92.86
- Year-to-date return: 33.57%
- 10-year return: 7.85%
- Dividend yield: 2.70%
- Similar options: Pfizer (PFE), Novartis (NVS), Merck & Co (MRK)