Pick these blue-chip stocks up while they’re still cheap.
There are many ways to construct a portfolio. Investors can make money investing in pure growth names, deep value plays, special situations, swing trades and much more. However, for a time-tested path to long-term wealth, it’s hard to top blue-chip stocks. While many styles come in and out of favor, there’s rarely a time when owning high-quality growth and income stocks leads an investor astray. Companies with a long track record of growing earnings and dividends that can withstand the occasional recession tend to provide the most reliable long-term results. Even then, it’s still important to pick these blue-chips with prudence. After all, a good company bought at a bad price will likely still lead to mediocre results. So where are the bargain blue-chips today? Here are 10 of the best blue-chip stocks to buy for 2022.
Verizon Communications Inc. (ticker: VZ)
Verizon is one of the country’s three large mobile phone networks. All three have seen their share prices decline sharply in recent months. Of them, Verizon is the most attractive for growth and income investors. After all, AT&T Inc. (T) is slashing its dividend amid its complicated corporate restructuring. Meanwhile, T-Mobile US Inc. (TMUS) doesn’t pay a dividend at all. That leaves Verizon as the safest choice. Shares are paying a 5% dividend yield and are back down to where they traded in March 2020 at the height of the COVID-19 sell-off. However, at some point, Verizon will start to reap the benefits of the current 5G deployment cycle and see sentiment swing upward again. In the meantime, shares are selling for less than 10 times earnings.
Visa Inc. (V)
Unlike most blue chips, Visa is not a big dividend payer yet; it yields just 0.8%. However, it more than makes up for that with its incredible growth. Over the past 10 years, it has grown earnings and free cash flow at 16% and 15% compounded annually, respectively. Not surprisingly, it’s managed to post 18% annualized dividend increases as well, given its rapidly growing earnings. The issue with Visa, however, is that normally the stock is expensive. Investors pay up for quality. In 2021, however, payments stocks sold off due to a slower economic recovery in industries such as airlines. Visa is particularly tied to international transactions, which were slow to come back due to the emergence of the delta variant. But business will normalize. Visa stock now trades for less than 30 times forward earnings, a rare event for that stock. For a company that traditionally grows at 15% per year, investors should do well buying at this price, with the stock down more than 20% from recent highs.
Global Payments Inc. (GPN)
Visa has had an off year. For Global Payments, it’s been a catastrophe. Shares of the merchant acquirer company are now down a shocking 40% in 2021. Global Payments is a facilitator that makes transactions happen. It provides credit card readers to stores and then assists them with services such as chargebacks, currency transfer, fighting fraud and so on. There is both a hardware element and software and services to support the merchants, which are primarily small and midsize businesses, although it also supports e-commerce vendors. For folks bullish on Visa and Mastercard Inc. (MA), owning payments acquirers is a natural addition. It’s hard to see one thriving without the other. Global Payments, however, is much cheaper than Visa or Mastercard. GPN stock is going for just 13 times forward earnings, and analysts see it growing at a double-digit clip going forward as global travel picks up and the credit card sector rebounds.
Hormel Foods Corp. (HRL)
Hormel Foods is a dividend aristocrat, having given investors an annual dividend increase since the mid-1960s. It announced its latest hike, a 6% bump, during Thanksgiving week, taking Hormel stock’s yield up to 2.4%. The timing on that dividend increase was apt, as Hormel now relies on turkey meat — much more than Spam — to drive profits. The company isn’t just a legacy meat producer now, either. Hormel has rapidly diversified into millennial-friendly products such as salsas, guacamole, nut butters and plant-based meat alternatives. With its forward-thinking product portfolio, Hormel has managed much faster organic growth than most peers: Its earnings have more than tripled since the 2008 financial crisis. Analysts see earnings making a big jump in 2022 as the company rebounds from 2021’s cost inflation issues. The stock trades at just 22 times forward earnings. That’s not bad for a company that historically grows earnings at least 10% annually and gives out healthy dividend increases.
Clorox Co. (CLX)
Clorox got taken to the cleaners in 2021. The company enjoyed a record-breaking 2020 as folks stocked up on bleach and other essentials during the pandemic. However, last year’s record buying led to a slowdown in 2021 as many people had extra supplies in their pantry. The cost inflation issues also hit Clorox on the production side of the equation. Adding it all up, Clorox will earn only about $5.50 per share in profits in 2021. That’s way down from 2020’s $7.36. It’s even significantly below Clorox’s 2019 profit of $6.32 per share. Understandably, investors are nervous. However, analysts see Clorox’s profits topping 2019 levels in 2023 and hitting a new record high (even beating the pandemic year) in 2024. The company is in a weird situation post-pandemic as demand has dropped. Long-term, however, the company’s products are as essential as ever. And with shares down 16% in 2021, this is quite a sale in Clorox stock.
Coca-Cola Co. (KO)
Coca-Cola took a surprisingly big hit from the pandemic. Its sales dropped 28% in the second quarter of 2020 during the height of COVID-19. Coca-Cola, more than most food and beverage companies, relies on people being out and about. A ton of soda and bottled water consumption happens at stadiums, movie theaters, restaurants and other such public places. People stuck at home drank a lot less Coca-Cola-branded products. However, this has turned Coca-Cola into a stealth economic reopening play. The company is growing revenue and earnings at a double-digit rate this year as it gets back to pre-pandemic levels of sales. Going forward, analysts see mid-single digits growth. Meanwhile, the stock is at just 22 times forward earnings, offering a reasonable entry point for one of America’s most iconic brands.
Brown-Forman Corp. (BF.B)
Brown-Forman is a leading spirits company most well-known for the iconic Jack Daniel’s whiskey brand. It also has an assortment of other liquors; notably the company bought a major tequila maker, Casa Herradura, in the mid-2000s, beating the rush to that now-popular category. Brown-Forman has been one of America’s top-performing under-the-radar stocks over the past 30 years. A $10,000 investment in December 1991 would now be worth $419,000. What has made the company so successful? For one, it’s family-run and management operates it with an eye to dominating over decades rather than worrying about the next quarter. For another, the company has been quick to recognize opportunity in tequila, emerging markets and new product categories such as ready-to-drink canned spirits. Brown-Forman stock has struggled since the pandemic with bars operating under restrictions and shortages affecting the supply chain. However, the firm should get back to normal over the next 12 months.
Becton, Dickinson and Co. (BDX)
Becton, Dickinson and Co. is a leading diversified health care company. It is primarily known for providing essential tools for surgeries, such as needles and syringes. The company is also the leader in a variety of niche medical applications, such as catheters and access tools for dialysis. The company also has a medical devices division and a diabetes business that it intends to spin off as a separate company in 2022. Becton, Dickinson has become a powerhouse thanks to its assortment of strong product lines. The company is a dividend aristocrat that has rewarded shareholders with annual payout increases for decades. Normally, BDX trades at a premium valuation compared with the S&P 500. However, shares have underperformed since the pandemic due to some delays in elective surgeries. As medical treatment schedules return to normal, shares should rally. And over the long term, the company is a perfect way to play the demographic trend of the aging of America.
Lockheed Martin Corp. (LMT)
Major defense contractor Lockheed Martin has had a rough year. Shares are down slightly year to date and have badly lagged behind the market. Investors sold off defense stocks hard following the withdrawal of troops from Afghanistan, which led to the impression that defense spending will be down. That misses the point, however, that firms like Lockheed Martin establish contracts with life spans in the decades from key defense assets such as fighter jets. Short-term political changes are unlikely to make a significant difference in the earnings outlook for Lockheed Martin. Additionally, shares have been under pressure due to the environmental, social and governance, or ESG, investing trend. Not surprisingly, many socially conscious investors don’t want to own arms makers. That creates more of an opportunity for everyone else, though. Analysts see Lockheed continuing to post solid earnings growth. Meanwhile, shares trade for just 13 times forward earnings and offer a 3.3% dividend yield.
Walmart Inc. (WMT)
Walmart has had an interesting couple of years. Initially, it looked like a big pandemic beneficiary. In particular, the company was finally able to give its e-commerce business a jump-start as people started ordering groceries and essentials through its website and app. However, Walmart stalled out in 2021, with shares down a few percent year to date. The company has faced multiple issues with both labor shortages and higher inventory and logistics costs making an impact on profit margins. Over the longer term, however, Walmart should see lasting gains in its e-commerce business, and the cost issues will work themselves out in due time. With the stock down a little as of late, Walmart now sells for just 21 times forward earnings.
10 of the best blue-chip stocks to buy for 2022:
— Verizon Communications Inc. (ticker: VZ)
— Visa Inc. (V)
— Global Payments Inc. (GPN)
— Hormel Foods Corp. (HRL)
— Clorox Co. (CLX)
— Coca-Cola Co. (KO)
— Brown-Forman Corp. (BF.B)
— Becton, Dickinson and Co. (BDX)
— Lockheed Martin Corp. (LMT)
— Walmart Inc. (WMT)
More from U.S. News
9 Highest Dividend-Paying Stocks in the S&P 500
9 Best Cheap Stocks to Buy Under $10
What’s the Best Cryptocurrency to Invest in Now? 7 Contenders
10 of the Best Blue-Chip Stocks to Buy for 2022 originally appeared on usnews.com
