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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PEPSICO INC. $100 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.4 billion; Market cap: $140.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola....
The company also faces uncertainty over the future of NAFTA....
CANADIAN PACIFIC RAILWAY $227.98 (Toronto symbol CP; shares outstanding: 143.1 million; Market cap: $32.6 billion; TSINetwork Rating: Above Average; Dividend yield: 1.0%; www.cpr.ca) ships freight over a 22,000-kilometre rail network between Montreal and Vancouver, with links to hubs in the U.S.
In the quarter ended March 31, 2018, the company’s revenue rose 3.7%, to $1.66 billion from $1.60 billion a year earlier....
ROYAL BANK OF CANADA $97 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $135.8 billion; Price-to-sales: 3.5; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank with assets of $1.27 trillion.
Royal continues to profit from its November 2015 purchase of Los Angeles-based City National Bank....
We feel those moves will continue to spur the bank’s earnings and give it more room to keep raising its dividend.
BANK OF MONTREAL $95 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 645.5 million; Market cap: $61.3 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.bmo.com) originally began operating in 1817, making it Canada’s oldest chartered bank.
With assets of $727.9 billion as of January 31, 2018, it’s now the fourth-largest Canadian bank; it’s the eighth-largest in North America.
Bank of Montreal currently provides a wide range of financial services to over 10 million customers from 900 branches in Canada and 600 in the U.S....
In March 2014, the company purchased Shoppers Drug Mart, which operates 1,334 drug stores across the country.
Effective February 1, 2018, the company merged the PC Plus loyalty rewards plan at its Loblaw supermarkets with the Shoppers’ Optimum program....