10 of the Best Blue-Chip Stocks to Buy for 2022

Pick up these blue-chip stocks up while they’re still cheap.

Portfolio construction is an art, not a science. Some investors prefer growth, some like value, some favor large household names, and others prefer smaller companies. There’s no one correct answer in terms of building a portfolio. However, if the events of the past two years have taught any lessons, one is that blue-chip stocks remain a leading option for portfolio construction. As things such as disruptive technology stocks and economic reopening trades have seen their fortunes violently swing about, blue chips have tended to offer more stable, predictable returns. 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. With interest rates soaring and geopolitical tensions at unprecedented levels, the case for owning defensive blue-chip stocks is stronger than ever. 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 largest mobile phone networks. All three have struggled in recent months; VZ stock is only a few percentage points above its 52-week lows, for example. For growth and income investors, Verizon is the best pick of the bunch. AT&T Inc. (T) is cutting 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 5G deployment cycle and see sentiment swing upward again. In the meantime, shares are selling for less than 10 times earnings.

Walmart Inc. (WMT)

Walmart was one of the large American companies to entirely hold its value during the great financial crisis. An investor who bought WMT stock at the market peak in 2007 actually earned a small profit by the time the market bottomed in March 2009. That’s because Walmart is as defensive of a blue-chip stock as can be found. When the economy slows, some consumers have to trade down and get more value from their purchases. Walmart, as the king of everyday low prices, is able to fit that bill. Walmart enjoyed a surge in demand in 2020, but results have slowed down since then as inflation and rising labor costs have put a crimp on profit margins. Regardless, as the economy decelerates amid surging gasoline prices, Walmart could be positioned for another period of strong outperformance.

Kimberly-Clark Corp. (KMB)

Kimberly-Clark is a leader in manufacturing toilet paper and other sanitary and hygiene-related products. The company enjoyed unusually robust sales during 2020 as toilet paper became a sought-after commodity. This naturally led to a slowdown in 2021, however, as many people ended up having an excess inventory of Kimberly-Clark products that took months to work through. Throw in the inflationary wave in input costs such as wood pulp, and Kimberly-Clark’s profits have slipped from 2020’s record levels. Analysts see Kimberly-Clark returning to pre-pandemic levels of profitability in 2023, however, which would put earnings at about $7 per share. That would amount to just a 17 times forward price-earnings ratio. Additionally, the stock offers a high dividend yield of 3.8%.

Exxon Mobil Corp. (XOM)

Decade after decade, Exxon Mobil has been one of the most reliable energy investments. The company is absolutely gargantuan in scope, owning an unrivaled collection of oil and gas fields, refineries, distribution assets, and so on. It also tends to be counter-cyclical in nature. This means that Exxon Mobil is willing to keep investing in new assets even when the industry as a whole is in a slump. During the 2014-2020 oil bear market, for example, Exxon kept plowing money into its gigantic new offshore Guyana oil field when many competitors pulled back on their spending. Now, with oil prices surging back to the triple digits, Exxon is reaping the rewards of its forward-thinking investment. On top of that, Exxon was one of the few energy players not to slash its dividend during the COVID-19 downturn. That makes it an even more dependable blue chip for income investors. Shares currently yield 4.3%.

JPMorgan Chase & Co. (JPM)

With interest rates surging and the Federal Reserve finally hiking its benchmark rate, it’d only be natural to see bank stocks soaring. But they aren’t. JPMorgan Chase stock, for example, is down nearly 20% from its recent highs. It seems traders are more worried about a slower economy than thinking of the higher profit margins that will be coming for banks. That could be a golden opportunity for investors who want to profit from rising interest rates and missed the first move higher. JPM stock is trading near 10 times earnings. It should see a boost to earnings with interest rates moving higher. Also, strong activity in areas such as investment banking can boost results. Currently, the stock is offering a 2.9% dividend yield in addition to its attractive starting valuation.

Home Depot Inc. (HD)

On the flip side of the interest rate trade from JPMorgan Chase is Home Depot. The leading home improvement goods retailer has seen its shares slide more than 20% from recent highs. The thinking there is that as interest rates surge, the housing market will slow down, leading to lower sales activity for Home Depot. Arguably, the company also enjoyed some one-time sales momentum during the pandemic as people were stuck at home and had more time and money to spend on renovating their residences. All that being the case, home improvement should still be a strong market. Demographically speaking, in particular, a ton of millennials still need a place of their own, which will keep a floor under the housing market. And now, with HD stock at just 20 times earnings, arguably any housing market slowdown is already baked into the share price.

McDonald’s Corp. (MCD)

The Golden Arches offer investors two ways to win in inflationary market conditions. First off, it’s a benefit from the same “trade down” effect as Walmart. When the economy is booming, people don’t mind spending $15 for lunch. As gas prices continue to soar, however, many consumers may go back to more value-driven restaurant offerings. The other angle is in terms of McDonald’s real estate holdings. The company owns tens of billions of dollars of real estate, much of which is then rented out to franchisees who operate McDonald’s restaurants. During periods of high inflation, real estate tends to appreciate quickly, which will cause a large gain in the value of McDonald’s property empire. It wouldn’t be surprising if activist investors once again urge McDonald’s to spin off its real estate assets. In the meantime, the actual operating business is selling for just 23 times earnings after its recent sell-off.

American Tower Corp. (AMT)

American Tower is the world’s largest owner and operator of cell phone towers and other such telecom infrastructure assets. An American Tower site allows telecom firms such as Verizon Communications to deliver mobile signals to its customers. A big part of the appeal of American Tower is that it can often rent towers to up to three tenants at the same time, earning strong profit margins thanks to this pooling of costs among various customers. Skeptics might argue that American Tower is too big to grow much more, as it already has more than 220,000 sites around the world. However, it still sees expansion opportunities in emerging markets such as Latin America. Meanwhile, 5G rollout is causing rising demand in mature markets, as well. A big part of American Tower’s appeal is that it pays a dividend that is increased with every quarterly payment. Shares currently yield 2.3%.

Visa Inc. (V)

Visa is far from the highest-yielding stock on this list, as it currently pays just 0.7% upfront. But that is offset by its incredible growth rate. Over the past decade, it has grown earnings and free cash flow at 16% and 15% compounded annually, respectively. The dividend has grown even faster, at 18% per year. Normally, investors have to pay a high price to own Visa and its rapidly growing business. Shares of the credit card giant are still in a slump now, however, due to the relatively slow return of higher-margin international transactions. While COVID-19 is fading as a headwind for the company, now Visa faces the loss of its Russian business as a new short-term obstacle. That’s more than reflected in the stock price, however. At $220 per share, Visa is selling for just 30 times this year’s projected earnings and 25 times projected 2023 earnings. That’s a bargain for a company of Visa’s caliber.

Global Payments Inc. (GPN)

If Visa had a bad year, payments industry peer Global Payments had an utterly dreadful 2021. Shares declined by more than 40% last year, making it one of the worst performers in the entire S&P 500 index. 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 and fighting fraud. 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. Global Payments faces some of the same issues as Visa and other industry leaders. The valuation is hard to explain, though, with shares trading at just 14 times forward earnings. That’s even as analysts see double-digit earnings-per-share growth for at least the next three years.

10 of the best blue-chip stocks to buy for 2022:

— Verizon Communications Inc. (VZ)

— Walmart Inc. (WMT)

— Kimberly-Clark Corp. (KMB)

— Exxon Mobil Corp. (XOM)

— JPMorgan Chase & Co. (JPM)

— Home Depot Inc. (HD)

— McDonald’s Corp. (MCD)

— American Tower Corp. (AMT)

— Visa Inc. (V)

— Global Payments Inc. (GPN)

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10 of the Best Blue-Chip Stocks to Buy for 2022 originally appeared on usnews.com

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