The stock market ended 2023 with a powerful rally. Investors are reacting gleefully as it appears that the Federal Reserve is set to pivot toward easier monetary policy. Many growth-focused or speculative companies have seen their shares soar. This might leave some investors wanting to add more defensive picks to their portfolios for next year in case the current good times end. Between geopolitical uncertainty and the potential for a recession, it’s a good time to pick up high quality blue-chip stocks, and these are 10 of the best for 2024:
[Sign up for stock news with our Invested newsletter.]
— Verizon Communications Inc. (ticker: VZ)
— Nestle SA (OTC: NSRGY)
— Thermo Fisher Scientific Inc. (TMO)
— Duke Energy Corp. (DUK)
— Emerson Electric Co. (EMR)
— Estee Lauder Cos. Inc. (EL)
— Kimberly-Clark Corp. (KMB)
— Dow Inc. (DOW)
— Realty Income Corp. (O)
— Diageo PLC (DEO)
Verizon Communications Inc. (VZ)
Investors have long looked to the large telecom companies as leading blue-chip stock picks. Unfortunately, their reputation has been tarnished a bit over the past few years. Heavy investments in 5G networks along with rising interest rates strained the major telecoms’ balance sheets. Some investors fretted about whether Verizon would follow in AT&T Inc.’s (T) footsteps and trim its dividend. However, it appears that the sector is starting to turn the corner. Verizon shares rallied sharply over the past quarter to pare their losses on the year. The company’s recent earnings have looked better, and it seems that Verizon is through the worst part of its capital investment cycle. This leaves shares at just eight times forward earnings today while offering a 7.1% dividend yield.
Nestle SA (OTC: NSRGY)
Nestle is the world’s largest publicly traded food company, and one of the Swiss economy’s most important firms. It has been in business for 157 years and generates nearly 100 billion Swiss francs in annualized revenues. With brands like Nestle, Nescafe, Purina, Kit Kat and many more, Nestle has a business that is nearly impervious to near-term changes in the economy or consumer tastes and preferences. While Nestle is never the flashiest stock out there in any given year, the stock has delivered tremendous long-term returns. Management also steadily dials up dividend increases for its shareholders as well. These are all the sorts of traits that blue-chip stock investors tend to focus on, and rightfully so. Nestle currently pays a 2.9% dividend.
Thermo Fisher Scientific Inc. (TMO)
Thermo Fisher Scientific is a scientific equipment company focused on health care. Products include analytical tools, life sciences, lab products and services, and specialty diagnostic products. The company should enjoy a tremendous long-term tailwind as global investments in pharma and biotech research continue to grow. However, Thermo Fisher Scientific had a bumpy year in 2023. The company had enjoyed windfall profits over the past couple of years related to COVID-19 testing and vaccine development. As these revenues have largely dried up, it has caused the firm’s overall revenues and profitability to slow down. However, investors should take advantage of the current uncertainty. TMO stock has been essentially flat since 2021. That’s unlikely to remain the case for long as the company returns to profit growth plus likely bolt-on acquisitions in 2024 and beyond. Thermo Fisher has quietly amassed a $200 billion market cap and is a great blue-chip selection for the health care sector.
Duke Energy Corp. (DUK)
Duke is a large, regulated U.S. electricity company with a focus on southern states such as Florida and North Carolina. That has served the company well as these states have generally had strong economies with healthy population and economic growth. Duke also recently received a favorable rate agreement with regulators in North Carolina. Like many utility stocks, Duke Energy shares significantly lagged the market in 2023. This came about in large part due to higher interest rates, which lowered the appeal of dividend stocks. With interest rates expected to decline, however, the outlook should be better for the electric utilities in 2024. That’s doubly true as Duke is planning to invest $65 billion in capital works between 2023 and 2027 and so a fall in interest rates should save it a considerable amount in terms of debt service.
[READ: 15 Best Dividend Stocks to Buy for 2024]
Emerson Electric Co. (EMR)
Emerson Electric is an industrial company that makes electrical components and equipment. In more recent years, Emerson has invested in software and process automation for enabling factory logistics and management. Naturally, software tends to be a higher-margin business than industrial equipment. Thus, as Emerson continues to reposition its operations toward software and automation, the firm’s profit margins and attractiveness will rise. Despite this, it seems many investors haven’t fully wised up to the business’s internal self-improvement efforts; shares remain at a fine price now, selling for 18 times forward earnings. That’s a good entry point for a company which analysts see posting double-digit earnings growth in fiscal year 2024.
Estee Lauder Cos. Inc. (EL)
Estee Lauder is one of the world’s leading cosmetic care companies. The category, including Estee Lauder, enjoyed a boom in recent years as the global economy reopened. Travel retail, a key distribution channel, also initially bounced back. But the good times have ended. Estee Lauder shares fell approximately 40% in 2023 as it saw a significant downturn in its fortunes in key markets including China. In the bigger picture, it seems unlikely that there has been any fundamental move away from beauty products. That’s especially true with the rise of influencer culture and social media applications such as TikTok. In addition, the rise of the global middle class should drive further Estee Lauder growth over the years in markets like India and Latin America.
Kimberly-Clark Corp. (KMB)
Kimberly-Clark is another firm whose business temporarily benefited from and then was disrupted by the pandemic. At first, people stocked up on toiletries and cleaning products but that sales bump quickly reversed itself. Throw in inflation and rising input and labor costs and profits for consumer staples companies like Kimberly-Clark came under pressure. However, the sector now appears to be through the worst of the storm. Analysts are expecting double-digit earnings per share growth for full-year 2023 and another 7% in 2024. That combined with a reasonable forward P/E ratio of 17 makes Kimberly-Clark a reasonably priced sleep-well-at-night blue-chip stock.
Dow Inc. (DOW)
Dow Chemical is an iconic name within the blue-chip stocks category. The firm’s history originally dates back to the 1800s, though the company’s present form came about from a merger and subsequent spinoffs between it and DuPont de Nemours Inc. (DD). The Dow of today offers a vast array of chemical products which are primarily sold in turn to other industrial firms rather than end consumers. Dow is heavily involved in plastics and packaging along with some industrial markets such as automobiles. Dow has enjoyed a strong structural benefit over rivals in Europe and Asia thanks to the availability of cheap natural gas — a key chemical input — in the North American market. While Dow is a cyclical business that is tied to the overall economy’s strength, its broad range of products and low-cost operating structure largely protects the firm from economic volatility. Shares currently yield 5.1%.
Realty Income Corp. (O)
Realty Income is a triple-net real estate investment trust. Triple-net leases are unique because the tenant, rather than the landlord, is responsible for certain operating costs such as taxes and maintenance. Realty Income has established a solid reputation for itself with its long operating history. Indeed the firm has grown its dividend for 25 years in a row, proving its resilience through past market downturns such as 2008 and the COVID-19 pandemic. Realty Income also wisely divested its office portfolio several years ago, which positions itself with holdings that better reflect the needs of businesses and tenants heading into 2024. Realty Income shares fell meaningfully in 2023, pushing the stock down to less than 14 times funds from operations (FFO). The stock yields 5.4% and dividends are paid on a monthly basis.
Diageo PLC (DEO)
Diageo is a Britain-based multinational spirits and alcoholic beverages company. It is known for brands such as Johnnie Walker, Smirnoff, Don Julio, Captain Morgan and Guinness beer. Alcohol sales tend to be stable regardless of economic conditions as it is a recession-resistant business. That said, Diageo recently warned of weaker sales in its Latin American and Caribbean markets this year. As a result, shares slumped to multiyear lows, making Diageo stand out as one of the few large-cap companies whose shares are still down close to 20% in 2023. The company should reverse those losses in 2024 as a combination of falling interest rates, improving travel retail and inventory level normalization all should pave the way for a recovery in this blue-chip stock.
More from U.S. News
Recession 2024: What to Watch and How to Prepare
7 Best High-Dividend ETFs to Buy Now
Best Places to Invest in Real Estate in 2024
10 Best Blue-Chip Stocks to Buy for 2024 originally appeared on usnews.com
Update 12/26/23: This story was previously published at an earlier date and has been updated with new information.
