Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.
The root of the term “blue chip” stems from the game of poker, as the blue chips represent the highest value. Investing in blue chip stocks can give you an additional measure of safety in today’s turbulent markets.
Pat McKeough believes investors will profit most, and with the least amount of risk, by putting the bulk of your stock portfolio in shares of blue chip companies—those that are well-established, with strong balance sheets and steady earnings and cash flow. These are companies that have bright prospects in healthy and growing industries.
The best blue chips offer both capital gains growth potential and regular dividend income. The dividend yield is certainly one of the most concrete indicators of a sound investment. It is the percentage you get when you divide the current yearly dividend payment by the share or unit price of the investment. It’s an indicator we pay especially close attention to when we select stocks to recommend in our investment newsletters.
We feel most investors should hold the largest part of their investment portfolios in securities from blue chip companies. All these stocks should offer good “value”—that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Ideally, they should also have above average-growth prospects in expanding markets.
Meanwhile, when investing in any type of stock, at TSI Network we recommend using our three-part Successful Investor strategy:
1-Invest mainly in well-established companies;
2-Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
3-Downplay or avoid stocks in the broker/media limelight.
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CANADIAN NATIONAL RAILWAY CO. $133 (www.cn.ca) is still a buy. CN recently agreed to acquire Kansas City Southern (New York symbol KSU), which operates a rail network of roughly 11,400 kilometres extending from the U.S. Midwest and Southeast into Mexico. To help it win regulatory… Read More
GREAT-WEST LIFECO, $36.51, is still a hold. The insurer (Toronto symbol GWO; shares outstanding: 928.4 million; Market cap: $34.3 billion; TSINetwork Rating: Above Average; Dividend yield: 4.8%; www.greatwestlifeco.com) recently paid $4.4 billion for the retirement services business of Massachusetts Mutual Life Insurance Company.
Due to… Read More
BCE and Telus are high-quality firms with businesses that were well-prepared to withstand the COVID-19 slowdown. Longer term, the recent launch of their new ultrafast 5G wireless networks provides strong growth prospects and should boost their cash flow to pay for dividend increases.
TELUS, $27.51 (Toronto… Read More
McDonald’s shares have rebounded strongly from last year’s coronavirus shutdowns. That’s due to the fast-food leader’s plan to expand its drive-thru capacity and keep most outlets operating despite the pandemic. New investments in online ordering and home delivery have also helped it overcome the downturn.
The… Read More
Business for our two top Canadian insurance recommendations remains strong, both in Canada and internationally. These two stocks have recovered all of the ground they lost in March 2020—and we think they are now poised to move even higher. Meanwhile, each insurer offers you solid,… Read More
CANADIAN PACIFIC RAILWAY $468.87, is a buy. The company (Toronto symbol CP; shares o/s: 135.6 million; Market cap: $61.6 billion; Rating: Above Average; Dividend yield: 0.8%) recently offered to acquire U.S.-based railway Kansas City Southern (New York symbol KSU) for roughly $29 billion U.S. Its… Read More
Even with the economic disruption brought on by COVID-19, we like the long-term prospects for investors in TD Bank. This Canadian big bank was as well prepared—and well capitalized—to handle the pandemic as it was the 2008-2009 financial crisis. We still see TD Bank as… Read More
CP’s shares fell slightly after it announced it would merge with U.S. railway Kansas City Southern. Investors initially thought CP was paying too much. However, the stock quickly recovered as investors realized the major long-term benefits of this takeover.
The combined company will be able to… Read More
CANADIAN PACIFIC RAILWAY $475.99, is a buy. The company (Toronto symbol CP; shares o/s: 133.3 million; Market cap: $63.0 billion; Rating: Above Average; Dividend yield: 0.8%) has now agreed to acquire U.S.-based railway Kansas City Southern (New York symbol KSU) for roughly $29 billion U.S. Its rail network of… Read More
TD BANK $83.66 is a buy. The bank (Toronto symbol TD; Shares o/s: 1.8 billion; Market cap: $151.8 billion; TSINetwork Rating: Above Average; Dividend yield: 3.8%; www.td.com) has now agreed to buy Headlands Tech Global Markets. This private firm makes software that automates the electronic trading of municipal and corporate… Read More
Business for our two top Canadian insurance recommendations remains steady despite COVID-19—and both have now rebounded to their all-time highs. Meanwhile, due to the pandemic, Canadian financial regulators have instructed federally regulated firms, including Manulife and Sun Life, to postpone their planned dividend increases. However,… Read More
George Weston now plans to sell off its 139-year-old Weston Bakery unit. That will give it lots of cash—potentially as much as $2.2 billion or more—to buy back shares or boost dividends. At the same time, a sale will help to reduce George Weston’s “holding… Read More
PROCTER & GAMBLE CO. $133 is a buy. The stock (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.5 billion; Market cap: $332.5 billion; Price-to-sales ratio: 4.4; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.pg.com) gives you a stake in one of the world’s largest… Read More
LOBLAW COMPANIES, $62.64, (Toronto symbol L; Shares outstanding: 347.4 million; Market cap: $21.8 billion; TSINetwork Rating: Above Average; Dividend yield: 2.1%; www.loblaw.ca) is a buy. The company continues to benefit from strong demand for groceries as COVID-19 lockdowns prompt people to eat more of their meals at home.
In the… Read More
IBM, $122.36, is still a buy. The company (New York symbol IBM; Shares o/s: 893.6 million; Market cap: $107.5 billion; TSINetwork Rating: Above Average; Yield: 5.3%) announced recently that it will spin off its Managed Infrastructure Services unit. That legacy business helps clients manage their datacentres.
Now, the company is… Read More
BANK OF NOVA SCOTIA $76.98 (Toronto symbol BNS; Shares outstanding: 1.2 billion; Market cap: $92.9 billion; TSINetwork Rating: Above Average; Dividend yield: 4.7%; www.scotiabank.com) is Canada’s third-largest bank.
Thanks to an improving economic outlook, the bank is reversing some of the provisions it booked to cover bad loans… Read More
Due to COVID-19, 3M had to quickly ramp up its production of various safety equipment, including N95 respirator masks (they block 95% of very small particles, including those containing the virus). That offset its slow sales to makers of automotive and electronic goods. However, demand… Read More
Intact Financial dropped along with the market when COVID-19 first hit—the stock fell to as low as $104.81 in March 2020. But the shares have rebounded 39%, close to all-time highs, as investors again appreciate Intact’s underlying business strength. Meantime, we think this Power Buy is poised… Read More
CN’s shares have shot up nearly 50% from their March 2020 low of $92. Investors should expect the company to continue benefiting as the economy recovers from the COVID-19 pandemic. The recent cancellation of the Keystone XL oil pipeline by new U.S. president Joe Biden… Read More
CP Rail is well positioned to keep weathering any COVID-19-related slowdowns or disruptions to its shipping markets. Metro is in a similar position as it continues to build its strong market position as an essential service during the pandemic. Both stocks are still buys.
CANADIAN PACIFIC RAILWAY… Read More
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