Looking for top blue-chip dividend stocks to add to your portfolio? Follow our advice and it will help you spot the best of these key portfolio builders.

There are a host of key indicators to determine if a security is a safer investment, like management integrity, the company’s growth prospects and its stock price in relation to its sales, earnings, cash flow and so on.

Dividends are also a key factor. And for a true measure of stability, focus on those companies that have maintained or raised their dividends during economic or stock-market downturns.

All in all, focusing on these important measures of investment quality will help you spot top blue-chip dividend stocks to add to your portfolio.

Top blue-chip dividend stocks are cornerstones of a successful portfolio

If you follow our three-pronged approach, then we think you should have an above-average chance of long-term gains in excess of what you’d get with any other investment approach.

We recommend many top blue-chip stocks in The Successful Investor and Wall Street Stock Forecaster. These blue-chip stocks have a history of earnings and, in most cases, dividends. They have established their value over the long term. Like all stocks, they can fluctuate and will likely suffer along with most other stock in a long-term market downturn, but they offer a higher probability of long-term gains.

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

We feel most investors should hold the bulk of their investment portfolios in blue-chip investments. 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, compared to alternative investments.

At the same time, note that if a deep or long-lasting market setback does occur, aggressive stocks you own are likely to fall more than shares of blue-chip companies. The eventual recovery of aggressive stocks is also less certain. That’s why we recommend that you hold the bulk of your investment portfolio in the best blue-chip companies.

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Know what to look for with the top blue-chip dividend stocks

It’s essential to invest in stocks that have some history of sales, if not profits. Blue chip stocks are generally well-established, dividend-paying corporations with strong business prospects. These are companies that also have strong management that will tend to make the right moves to compete in a changing marketplace.

Blue chip investments should have industry prominence if not dominance. Major companies can influence legislation, industry trends and other business factors to suit themselves.

This also includes companies that anticipate advances in their industry, adjust to changing conditions and technology and withstand strong competition. They also have the confidence to pay dividends year after year.

The top blue chip dividend stocks will often have hidden assets

Good blue-chip investments may have hidden assets, for example, in the form of real estate. For instance, when a company buys real estate, the purchase price goes on its balance sheet at the historical value of the asset. Over a period of years or even decades, the market value of that real estate may climb substantially. But the purchase price remains unchanged on the balance sheet. Often you have to look closely to spot this hidden value.

At times, the hidden value in a company’s real estate can even come to exceed the market value of its stock. This hidden value may only become apparent to investors when the company upgrades the use of the real estate. For example, a merchandiser might repurpose a parking lot to build a shopping mall with a residential condo tower on higher floors, and a parking garage down below.

Know that Canadian investors get an added bonus from investing in the top blue-chip dividend stocks

Canadian dividend blue chip stocks offer both capital gains growth potential and regular income from dividend payments. In fact, dividends are likely to be paid regardless of how quickly the price of the underlying stock may rise.

Taxpayers in Canada who hold dividend-paying stocks get an additional bonus. Their dividends can be eligible for the dividend tax credit in Canada. This means that dividend income will be taxed at a lower rate than the same amount of interest income.

When you add the security of stocks with a record of dividend payments going back many years to the potential for tax-advantaged capital gains—plus dividend income—dividend-paying Canadian blue-chip stocks become an attractive way to increase returns with lower risk.

Use our three-part Successful Investor approach to find the top blue-chip dividend stocks for your portfolio

1. Hold mostly high-quality, dividend-paying stocks.
2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance, and Utilities.
3. Downplay or stay out of stocks in the broker/media limelight.

By how much should a company’s ability to declare a dividend offset modest stock price growth?