11 Best Blue Chip Stocks To Buy Now

Published on January 18, 2022 at 11:01 am by Usman Kabir in Hedge Funds, News

In this article, we discuss the 11 best blue chip stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Blue Chip Stocks To Buy Now.

Newly released data from the Organization for Economic Cooperation and Development (OECD) shows that the United States and Chinese economies have surpassed pre-pandemic highs and are dwarfing the recovery in other parts of the world. The Gross Domestic Product of China, according to this data, was around $15 trillion at the end of 2021, up from $14.1 trillion at the end of 2019. The US GDP at the end of the year was $20 trillion, up 2% from pre-pandemic levels. The numbers go some way towards calming the markets that have been hit with inflation concerns in recent weeks and the rise of a new COVID-19 variant globally.

Preparing for 2022: What Should Investors Do?

However, analysts still expect a broad correction in growth stocks and a rise in interest rates in 2022. With supply chain bottlenecks, which have led to higher prices and consequently inflation, likely to persist, it makes sense for investors to load their portfolios with established businesses that can weather the coming storm. Some of the top blue chip stocks to buy now include Johnson & Johnson (NYSE:JNJ), Bristol-Myers Squibb Company (NYSE:BMY), and The Procter & Gamble Company (NYSE:PG), among others discussed in detail below.

Our Methodology

The companies that have well-established reputations, at least twenty years of consecutive dividend payouts, and yields above 1.5% were selected for the list. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some context for their investment choices.

Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.

Photo by Austin Distel on Unsplash

Best Blue Chip Stocks To Buy Now

11. Realty Income Corporation (NYSE:O)

Number of Hedge Fund Holders: 22

Consecutive Years of Dividend Payouts: 28

Dividend Yield: 4.09%

Realty Income Corporation (NYSE:O) is often referred to as the monthly dividend company since it focuses on providing shareholders with dependable monthly income. However, a careful look at the performance of the firm over the past few decades shows how far Realty Income Corporation (NYSE:O) has come. Since 1994, when it went public, Realty Income Corporation (NYSE:O) has increased the properties under management from 630 to close to 11,000. The real estate assets have meanwhile grown from $451 million to over $24 billion.

The annualized cash dividends from Realty Income Corporation (NYSE:O) have grown from $0.9 to $2.8 in this time span. The stats show that the stock has provided investors with handsome capital returns in addition to monthly income. 22 hedge funds in the database of Insider Monkey hold stakes worth $275 million in Realty Income Corporation (NYSE:O).

Just like Johnson & Johnson (NYSE:JNJ), Bristol-Myers Squibb Company (NYSE:BMY), and The Procter & Gamble Company (NYSE:PG), Realty Income Corporation (NYSE:O) is one of the stocks that value investors are buying.

10. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 45

Consecutive Years of Dividend Payouts: 52

Dividend Yield: 7.1%

Even though tobacco stocks like Altria Group, Inc. (NYSE:MO) have not enjoyed the best of times at the market in recent years, it is striking that the dividend performance of the firm has not been affected during this period. In fact, considering the inflation ahead, investors can pick up the shares of Altria Group, Inc. (NYSE:MO) at a major discount compared to the cover the stock can offer to the portfolio during a crisis.

Altria Group, Inc. (NYSE:MO) has registered 52 consecutive years of dividend growth and recently declared a quarterly dividend of $0.90 per share, in line with previous. Five years ago, the quarterly dividend from Altria Group, Inc. (NYSE:MO) was around $0.61 per share.

In its Q2 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and Altria Group, Inc. (NYSE:MO) was one of them. Here is what the fund said:

“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.

MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”

9. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 46

Consecutive Years of Dividend Payouts: 63

Dividend Yield: 3.28%

3M Company (NYSE:MMM) is among a rare breed of companies who have been labelled a “Dividend King” in lieu of fifty consecutive years of dividend growth. Only those firms with predictable cash flows and established businesses are able to pay a dividend to shareholders. To consecutively increase the dividend payout for over five decades, riding the market lows and highs during the time, is truly remarkable.

Hedge funds remain bullish on 3M Company (NYSE:MMM) as a new fiscal year begins. Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company (NYSE:MMM) with 5.6 million shares worth more than $983 million.

8. Colgate-Palmolive Company (NYSE:CL)

Number of Hedge Fund Holders: 54

Consecutive Years of Dividend Payouts: 58

Dividend Yield: 2.12%

Hedge funds have never been as bullish on Colgate-Palmolive Company (NYSE:CL) as they are now. According to a hedge fund database maintained by Insider Monkey, the number of funds with bullish views on Colgate-Palmolive Company (NYSE:CL) was 58 at the end of the third quarter. The all-time high for this number is around 53. New York-based investment firm First Eagle Investment Management is a leading shareholder in Colgate-Palmolive Company (NYSE:CL) with 11 million shares worth more than $880 million.

As the sales of non-durable goods increase and inflation numbers climb, Colgate-Palmolive Company (NYSE:CL) stands to benefit. The company beat market estimates on earnings per share and revenue for the third quarter by $0.01 and $10 million respectively.

Here is what First Eagle Investment Management has to say about Colgate-Palmolive Company (NYSE:CL) in its Q1 2021 investor letter:

“The leading detractors in the quarter (included) Colgate-Palmolive Company. After a strong 2020 fueled in part by lockdown-driven demand, consumer staples stocks generally cooled during the first quarter as investors shifted attention to the more economically sensitive areas of the market likely to benefit from re-openings and improved discretionary spending. The effects of this rotation could be seen in the share price underperformance of names like Colgate-Palmolive.”

7. Capital One Financial Corporation (NYSE:COF)

Number of Hedge Fund Holders: 55

Consecutive Years of Dividend Payouts: 26

Dividend Yield: 1.5%

Investors looking to outpace inflation can consider investing in Capital One Financial Corporation (NYSE:COF). The company offers a solid dividend profile. Since analysts expect interest rates to rise in the near future, Capital One Financial Corporation (NYSE:COF) could automatically grow net income by hundreds of millions, leading to a boost to the share price as a bonus in addition to safety from the inflationary environment.

Barclays analyst Jason Goldberg recently maintained an Overweight rating on Capital One Financial Corporation (NYSE:COF) stock and raised the price target to $207 from $205, backing the bank to outperform the wider market in 2022.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Capital One Financial Corporation (NYSE:COF) was one of them. Here is what the fund said:

“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. In financials, we increased our position in Capital One on the premise that a benign consumer credit environment should be sustainable in light of unprecedented government support.”

6. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 57

Consecutive Years of Dividend Payouts: 21

Dividend Yield: 4.74%

Verizon Communications Inc. (NYSE:VZ) was recently named among the top picks in the communications sector for 2022 by Bank of America. The increased spending on 5G networks was the primary reason behind the bullish outlook, with Verizon Communications Inc. (NYSE: VZ), in addition to AT&T, committing to $18 billion in 5G-related spending in the next three years. The baseline spend for these two firms over the period is already close to $100 billion.

Verizon Communications Inc. (NYSE: VZ) stock has climbed over 5% in the past few weeks as the rollout of brand new 5G services, which had been delayed earlier on the request of the US government, looks imminent.

In addition to Johnson & Johnson (NYSE:JNJ), Bristol-Myers Squibb Company (NYSE:BMY), and The Procter & Gamble Company (NYSE:PG), Verizon Communications Inc. (NYSE: VZ) is one of the stocks attracting the attention of hedge funds.

In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE:VZ) was one of them. Here is what the fund said:

“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”

Click to continue reading and see 5 Best Blue Chip Stocks To Buy Now.