Blue chip companies worthy of investment are presented here in our blue chip stock list

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 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 include some of these recommendations below in our blue chip stock list.

How can blue chip investing benefit your portfolio?

We feel most investors should hold the largest part of their investment portfolios in securities from blue chip companies, like the ones on our blue chip stock list below. 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.

We advise investors to look for blue chip companies that are likely to pay off if business and the stock market are good, but that won’t hurt them too much during those inevitable periods when business or the markets are bad.

If you follow our three-pronged approach—diversifying across most if not all of the five main economic sectors, stick mainly to well-established companies and companies outside the media limelight—then you can be almost certain of long-term gains in excess of what you’d get with any other investment approach.

In a deep or long-lasting market setback, your blue chip stocks will tend to go down, along with everybody else’s. But we think they will go down less and recover sooner.

Our blue chip stock list

3M Company (New York symbol MMM) produces more than 60,000 items, including air purifiers, medical device components and bandages. Its top-selling brands include Post-it notes, Scotch tape, Scotch-Brite cleaning products, Scotchguard protection and Thinsulate insulation.

Canadian Imperial Bank of Commerce (Toronto symbol CM) is Canada’s fifth-largest bank.

Canadian Pacific Railway Ltd. (Toronto symbol CP) ships freight over a 22,000-kilometre rail network between Montreal and Vancouver. It links to hubs in the U.S. Midwest and Northeast.

Fortis Inc. (Toronto symbol FTS) began supplying electricity to St. John’s, Newfoundland, in 1885. The company is now the main power utility in Newfoundland and PEI.

Telus Corp. (Toronto symbol T) is Canada’s second-largest wireless carrier, after Rogers Communications, with over 8.4 million subscribers.

How to pick the right blue chip investments like the ones on our blue chip stock list

• Good blue chip investments have low debt. It doesn’t matter if you’re investing in blue chip stocks or penny stocks, the company under consideration should have manageable debt. When bad times hit, debt-heavy companies often go broke first.
• Blue chip investments should have industry prominence if not dominance. Major companies can influence legislation, industry trends and other business factors to suit themselves.
• Good blue chip investments often have hidden assets in the form of real estate. For instance, when a company buys real estate, the purchase price goes on its balance sheet as the historical value of the asset. Over a period of years or decades, the market value of that real estate may climb substantially. But the purchase price remains unchanged on the balance sheet.
• Review the company’s finances going back 5 to 10 years. The types of blue chip investments we recommend will generally have a history of profits going back for at least that long. Companies that make money regularly are safer than chronic or even occasional money losers.

Do you currently own any of the investments on our blue chip stock list? How have they performed for you? Please share your experience with us in the comments.