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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PENGROWTH ENERGY CORP. $0.35 (Toronto symbol PGF; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 560.0 million; Market cap: $196.0 million; Price-to-sales ratio: 0.4; Dividend suspended in January 2016; TSINetwork Rating: Speculative; www.pengrowth.com) has two main properties: its Lindbergh oil sands project in Alberta and its Groundbirch natural gas property in northeastern B.C.
Pengrowth produced an average of 22,707 barrels a day (81% oil and liquids, 19% natural gas) in the three months ended June 30, 2019....
BCE has gained 19% since the start of 2019, while Telus is up 6%. The gains reflect falling interest rates, which have enhanced the appeal of these high-yielding dividend stocks.
There’s more behind the share price increases: both firms continue to benefit from strong demand for wireless services as consumers give up their landlines....
The company also sells other forms of insurance, including health, dental and travel plans; in addition, it offers mutual funds and investment management services....
CANADIAN PACIFIC RAILWAY LTD. $317 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 139.8 million; Market cap: $44.3 billion; Price-to-sales ratio: 5.7; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight over a 23,700-kilometre rail network between Montreal and Vancouver, and to hubs in the U.S....
Canada’s top banks remain key investments for any portfolio, even as the possibility of lower interest rates and slower housing markets raise their risk levels. In fact, each of them is suitable for new buying. We do, however, see Bank of Nova Scotia (see page 81) and TD Bank as our top picks given their fast-growing international operations.
ROYAL BANK OF CANADA $101 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $141.4 billion; Price-to-sales ratio: 3.4; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.rbc.com) earned $3.23 billion in its fiscal 2019 second quarter, ended April 30, 2019....
We like all five, but feel Bank of Nova Scotia is particularly appealing for new buying right now given the recent drop in its stock price....
Excluding one-time items, IBM earned $2.827 billion in the three months ended June 30, 2019....
CANADIAN PACIFIC RAILWAY $315.11 (Toronto symbol CP; shares outstanding: 147.7 million; Market cap: $43.5 billion; TSINetwork Rating: Above Average; Dividend yield: 1.1%; www.cpr.ca) ships freight over a 22,000-kilometre rail network between Montreal and Vancouver, with links to hubs in the U.S....