True Blue Chips pay off

Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor.

Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.


Topic: Blue Chip Stocks

Here’s how to find the best blue chip dividend stocks to buy now for maximum portfolio returns

tsx blue chip stocks

The best blue chip dividend stocks to buy now will be key additions to your successful investor portfolio

We feel most investors should hold the largest part of their investment portfolios in securities from blue chip companies. Most of 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.

The best blue chip dividend stocks to buy now offer both capital gains growth potential and regular dividend income.

True Blue Chips pay off

Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor.

Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.


Look for these qualities of the best blue chip dividend stocks to buy now so you can make high-quality additions to your portfolio

Good blue chips have low debt: It doesn’t matter if you’re investing in blue chip stocks or penny stocks, the company under consideration should always have manageable debt. When bad times hit, debt-heavy companies often go broke first.

Blue chip investments should have industry prominence if not dominance: Major companies can best influence legislation, industry trends and other business factors to suit themselves.

Good blue-chip investments have the freedom to serve all shareholders: High-quality stock picks must be free of excess regulation, free of dependence on a single customer, and free from self-dealing insiders or parent companies. Canada-wide operations are also good, multinational better. There’s extra risk in firms confined to one geographical area.

Canadian blue-chips can lead to tax breaks: Canadian taxpayers who hold Canadian dividend stocks can be eligible for the dividend tax credit in Canada. This dividend tax credit—which is available on dividends paid on Canadian stocks held outside of an RRSP, RRIF or TFSA—can cut your effective tax rate.

The top blue-chips to invest in will often have hidden assets: These hidden assets are most valuable before the wider investing community recognizes them. They may come in a variety of areas, including real estate or highly respected brands.

Strategies for investing in the best blue chip dividend stocks to buy now for maximum gains

Follow our rules over long periods and you’ll likely achieve better-than-average investing results. Even so, your results will be uneven in a variety of ways. They’ll vary widely from year to year. In many years, most of your profits will occur in only a few of the five economic sectors; you may lose money in the others. Some years your U.S. stocks will provide most of the profits. Some years, your biggest profits may come from stock groups you hardly considered as groups such as stocks that trade on Nasdaq, or your biggest multinational companies.

Over time, you’ll probably find that a third of your dividend-paying blue-chip stocks do about as well as you hoped, a third do better, and a third do worse. This is partly due to that random element in stock pricing that we’ve often mentioned. It also grows out of the proverbial “wisdom of the crowd.” The market makes pricing mistakes and continually reverses itself. But the collective opinion of all individuals buying and selling in the market eventually beats any single expert opinion.

When the market slumps, you may zero in on your worst performers, and dwell on what you could have done to avoid them. You may calculate how much more money you would have made, if not for hanging on to your worst stocks. This may lead you to “cut your losses,” as brokers say—sell your worst performers—just to avoid the stress of worrying about future losses. There’s potential danger in that strategy.

The best blue chip dividend stocks to buy now are the kind of investments we put in our clients’ portfolios

Although we think the best blue chip stocks are worth holding on to indefinitely, we keep an open mind. After all, they are subject to the usual risks. Competitors can overtake them. Expected contracts can fall through. They can lose key employees, run into union or regulatory problems, and so on.

Of course, nobody can predict the future. We’ll change our view and sell some as time passes. We may give up on some too early, and hang on to others too long. But if you focus on stocks like these, you improve your odds. The best of the bunch will more than overcome your losses and leave you with highly satisfactory long-term returns.

Use our three-part Successful Investor approach while selecting the best blue chip dividend stocks to buy now

You will have a strong selection of blue-chip stocks in your portfolio when you follow our three-part investing program:

  1. Invest mainly in well-established, dividend-paying companies.
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities).
  3. Avoid or downplay stocks in the broker/media limelight.

Using these three principles will help protect your money during periods of market turbulence, and help you realize above-average profits when the market rises.

Do you worry about high dividend yields in blue chips or do you seek them out specifically?

How much of your portfolio do you dedicate to blue chip stocks?

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