The search for blue-chip stocks has really been lagging of late. The decade-long bull market we recently witnessed compensated investors for seeking growth over value. Thus, companies with rock-solid business models and fundamentals were glossed over in favor of more speculative names.
That said, it’s not 2021 anymore. Last year was a stark reminder to investors of what can happen when valuations matter again. Accordingly, blue-chip stocks have regained their luster among investors seeking to return to quality over the story.
Although there isn’t a single, comprehensive list of blue-chip stocks to choose from, the Dow Jones Industrial Average has typically been regarded as a reliable indicator of this group. In contrast to the S&P 500 and Nasdaq, which are comprised of smaller, newer, and more growth-oriented companies, the Dow Jones index tends to favor older, more established businesses. The Dow Jones may have lost some of its glamors, but in 2022 it found its footing again. The S&P 500 and Nasdaq have suffered losses of 19.8% and 32.6%, respectively, while the Dow was down only 9.6% through Dec. 20.
That said, this list of top blue-chip stocks actually comes from Canada’s Toronto Stock Exchange. I thought I’d mix things up and look at some high-quality companies that often get overlooked.
Let’s dive in.
|Royal Bank of Canada
Brookfield Corporation (BN)
Brookfield Corporation (NYSE:BN), the corporation formerly known as Brookfield Asset Management, is one conglomerate that many investors don’t dive into. That’s because this company’s corporate structure is so complicated many novice investors have difficulty determining where to begin. This is due to Brookfield’s extensive subsidiary network, which includes exposure to real estate, infrastructure, private equity, data center, and even the renewable energy sectors.
Although the majority of the company’s assets are in the United States and Canada, it also has exposure to both Brazil and Australia. This is one of the biggest firms in the nation, with a market cap of more than $60 billion, making Brookfield deserving of the label “blue-chip.”
Although BN’s dividend yields just over 1.5%, meaning many income investors won’t jump out of bed for this name, the company does have a 10-year history of dividend growth, making it a Canadian Payout Aristocrat. Interestingly, Brookfield has also increased that dividend at a high single-digit rate (7.5%) during the past five years. Currently, BN stock trades at around $37 per share.
Constellation Software (CNSWF)
One of Canada’s top-performing tech stocks, Constellation Software (OTCMKTS:CNSWF), is among the blue-chip stocks I think are worth buying on the dip, particularly for growth investors.
This company has one of the most solid track records of growth out of any company on the TSX. In fact, Constellation’s stock price has surged more than 1,800% over the past decade. Its dividend is essentially non-existent, but that’s for a good reason. This software conglomerate is a machine built for acquisitions. Thus, the company deliberately chooses to reinvest its cash flow into new businesses, compounding its value over time.
Notably, Constellation’s return on equity (ROE) is substantially higher than the industry average, at 9.4%. With a debt-to-equity ratio of 1.07, Constellation Software certainly utilizes a large amount of debt to increase returns. Although its ROE is quite outstanding, the company’s debt load is necessarily large to support such an M&A-heavy business model.
This company’s stock price has surged approximately 200% over the past five years. Considering the 2022 we just had, that’s really not bad.
Royal Bank of Canada (RY)
Last but certainly not least, the Royal Bank of Canada (NYSE:RY) rounds out this list of blue-chip stocks to buy. The largest company in Canada and among the biggest banks globally, Royal Bank certainly fits the bill for blue-chip stocks to consider right now.
While Royal Bank is certainly focused on the Canadian market, it’s essentially a global bank. Thus, like many of its American and European counterparts, Royal Bank’s fundamental performance is driven mainly by global macro trends.
As far as Royal Bank’s dividend is concerned, this is among the most robust players on this list. The company’s 3.9% dividend yield is meaningful, as is its 11-year dividend increase streak. With a five-year growth rate of over 6%, Royal Bank’s dividend is likewise expanding quickly.
Overall, I think a portfolio providing exposure to these three companies should outperform in the long term. These are overlooked blue-chip stocks I think are worth a look right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.