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Welcome to Episode #302 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is going solo to talk about the secrets of great blue chip stock investors.
She’s not talking about professional investors like Warren Buffett, Cathie Wood or Peter Lynch.
No, these are regular mom-and-pop investors who have decided to invest for the long term in dividend paying, blue-chip stocks.
They have taken small amounts of money and have grown it into big stock portfolios.
How did they do it?
And could you do it too?
Secrets of Blue-Chip Investors
1. Buy blue chips that pay dividends. Usually blue chips are S&P 500 companies, or larger cap companies, that have been in business for a while. They are often considered “boring.”
2. Diversify your portfolio. Ronald Read, a former janitor and gas station attendant in Vermont, who died in 2014 at age 92 after amassing an $8 million stock portfolio, had 95 stocks in his portfolio. But you don’t have to have that many. Anywhere from 10 to 20 will get you diversity.
3. You don’t have to own technology companies. Many blue-chip investors ignore the sector because many companies don’t pay dividends.
4. Dividend yields are part of the strategy. Some of the blue-chip investors use the cash paid out from the dividend payers to buy more stocks for their portfolio, instead of simply buying more shares of the stocks they already own.
Screening for Blue-Chip Stocks with Dividends
There is no way to screen for the “blue-chip” part that we want.
You can look for Zacks Ranks of #1 (Strong Buy) and #2 (Buy) to get rising earnings estimates.
Screening for stocks paying above a 2% yield should also produce more large cap stocks, than small, as they tend to pay out more dividends.
Image: Bigstock
Learn the Secrets of Great Blue-Chip Stock Investors
Welcome to Episode #302 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is going solo to talk about the secrets of great blue chip stock investors.
She’s not talking about professional investors like Warren Buffett, Cathie Wood or Peter Lynch.
No, these are regular mom-and-pop investors who have decided to invest for the long term in dividend paying, blue-chip stocks.
They have taken small amounts of money and have grown it into big stock portfolios.
How did they do it?
And could you do it too?
Secrets of Blue-Chip Investors
1. Buy blue chips that pay dividends. Usually blue chips are S&P 500 companies, or larger cap companies, that have been in business for a while. They are often considered “boring.”
2. Diversify your portfolio. Ronald Read, a former janitor and gas station attendant in Vermont, who died in 2014 at age 92 after amassing an $8 million stock portfolio, had 95 stocks in his portfolio. But you don’t have to have that many. Anywhere from 10 to 20 will get you diversity.
3. You don’t have to own technology companies. Many blue-chip investors ignore the sector because many companies don’t pay dividends.
4. Dividend yields are part of the strategy. Some of the blue-chip investors use the cash paid out from the dividend payers to buy more stocks for their portfolio, instead of simply buying more shares of the stocks they already own.
Screening for Blue-Chip Stocks with Dividends
There is no way to screen for the “blue-chip” part that we want.
You can look for Zacks Ranks of #1 (Strong Buy) and #2 (Buy) to get rising earnings estimates.
Screening for stocks paying above a 2% yield should also produce more large cap stocks, than small, as they tend to pay out more dividends.
5 Blue-Chip Stocks with Dividends
1. Broadcom (AVGO - Free Report)
Broadcom, the semiconductor giant, fits the definition of blue-chip with a market cap of $242 billion.
Broadcom pays a nice dividend for the technology industry, with a yield of 2.8%.
Shares have fallen about 10% year-to-date which have made Broadcom more attractive to value investors.
Broadcom now trades with a forward P/E of 17.8.
Is Broadcom a company to own for the long-term even though it’s in a cyclical industry?
2. Cisco (CSCO - Free Report)
Cisco is considered to be old tech, as it was one of the “tech titans” that dominated in the 1990s.
Shares are down 13% year-to-date, pushing Cisco’s forward P/E down to just 16.
For years, Cisco didn’t pay a dividend but it does now and it’s yielding 2.7%.
Is Cisco a blue-chip to hide out in in a volatile market?
3. Paychex (PAYX - Free Report)
Paychex provides solutions for Human Resources including payroll, benefits and insurance.
With a market cap of $43 billion, it’s big enough to be a blue-chip stock.
Paychex shares have fallen about 12% year-to-date but even with the pullback, still trade at 33x forward estimates.
Paychex pays a dividend yielding 2.2%.
Should Paychex be on your blue-chip list?
4. Ryder Systems, Inc. (R - Free Report)
Ryder operates a logistics and transportation company. It’s the smallest of the companies, with a market cap of just $3.8 billion.
But as shares have sunk this year by 12%, Ryder has gotten cheaper. It sports a forward P/E of just 7.8.
Ryder is also shareholder friendly, with a dividend yielding 3.3%.
Is Ryder overlooked by blue-chip investors?
5. Whirlpool Corp. (WHR - Free Report)
Whirlpool, the appliance manufacturer, has a market cap of $12 billion.
Shares have sunk 14% year-to-date on worries about a slowdown in the housing market and home remodeling.
Whirlpool trades with a forward P/E of just 7.2 as the Street thinks this might be “peak” earnings.
Whirlpool pays a dividend yielding 2.8%.
Should blue-chip investors keep Whirlpool on their short list?
What Else Should You Know About the Secrets of Great Blue-Chip Investors?
Tune into this week’s podcast to find out.