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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GENERAL ELECTRIC CO. (New York symbol GE; www.ge.com) recently agreed to form a major new alliance with France’s Alstom SA, a leading maker of electrical-transmission equipment and parts for power plants.
Under the deal, GE will form three 50/50 joint ventures with Alstom. One will combine the companies’ electrical grid operations, while a second will focus on products for renewable energy projects, like offshore wind farms. The third will hold Alstom’s nuclear-equipment division.
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BCE is facing regulatory hurdles, but the company is improving its services while keeping its operating costs down. That should let it maintain its high dividend yield.
BCE INC. (Toronto symbol BCE; www.bce.ca ) is Canada’s largest provider of telephone services, with 5.0 million customers in Ontario and Quebec. It also has 2.2 million high-speed Internet customers and 2.3 million TV subscribers.
BCE also sells wireless services to 7.8 million customers across Canada, and its Bell Media segment owns CTV Television, specialty channels and radio stations.
The company recently offered to buy the 56% of Bell Aliant (Toronto symbol BA) that it doesn’t already own. Bell Aliant sells phone and Internet services to 2.3 million clients in Atlantic Canada and rural Ontario and Quebec. It also provides wireless services through an alliance with BCE.
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