Investing in Blue-Chip Stocks: Stable Returns for Long-Term Investors
Blue-chip stocks, issued by large and stable companies that have withstood the test of time, offer investors a dependable and steady income stream. These stocks are known for their stability and can offer less volatility than other classes of stocks, making them ideal to hold long-term.
Why Blue-Chip Stocks Are a Safe Bet
Blue-chip stocks tend to have a large market capitalization (over $10 billion) and experience steady earnings growth over time. They have a strong cash flow and usually pay out a higher dividend yield than other classes of investments. This steady stream of dividends can act as a key source of passive income for investors. Companies that pay regular dividends, such as blue-chip companies, have their shares valued differently compared to companies that don’t pay dividends.
Examples of Stable Blue-Chip Stocks
AT&T and Apple are considered stable blue-chip tech stocks to hold during economic downturns. Both stocks outperformed the market over the past 12 months, with AT&T rising 5% and Apple dipping only 2% while the S&P 500 dropped 9%. AT&T’s spinoff of DirecTV and WarnerMedia has made it a stable and streamlined play on wireless and wireline networks, while Apple generates steady growth through its sales of iPhones, iPads, Macs, accessories, and services.
Banking on the Big 3: DBS, UOB, and OCBC
DBS, UOB, and OCBC, known as the Big 3, posted double-digit profits for 2022, driven by heightened interest rates. Despite the record-breaking performance, share prices for all three banks have fallen by between 7% to 8%. The Big 3 are consistent passive income producers, ranking in the top 15 among dividend-paying blue-chip stocks in Singapore. Shareholders of DBS will receive two dividend payouts for the first quarter of 2023 – a regular dividend payment of S$0.42 per share, and a special dividend of S$0.50 per share. UOB pays dividends semi-annually and announced a final dividend price of S$0.75 per share for 2022. OCBC, another semi-annual dividend stock, raised its dividend payment to S$0.40 per share for the first payout in 2023.
The Best Investment Strategy in History
Owning blue-chip dividend stocks for the long term is the best investment strategy in history. Dividend growth blue chips delivered around 13% annual returns and about 10% inflation-adjusted returns in the last 50 years. Almost half of all U.S. stocks turn into disasters, with 44% suffering permanent 70+% losses since 1980. Dividend Kings uses a 3,000-point safety and quality model that includes over 1,000 metrics to help investors avoid value traps. Selling dividend-cut stocks is usually a sound idea, as a steadily rising dividend is usually a sign of a healthy company, and a dividend cut means something is usually very wrong.