Now is an excellent time to research the top blue-chip stocks to buy for the long haul.
It’s safe to say that investors are stuck in a market that shows little conviction. This is frustrating for bulls and bears. One problem is valuation. Many stocks still are trading at a premium to the market. This includes some blue-chip stocks.
Some, but not all. And that’s where there’s an opportunity for investors who have the patience to look for the top blue-chip stocks to buy.
Blue-chip stocks have a better chance of revenue and earnings growth. The latter is the mother’s milk of stock price growth.
In order to find the best blue-chip stocks to buy now, I used a stock screener to find large-cap stocks that paid a dividend with a yield of over 2% and was trading within 10% of its 52-week low.
The list gave me a diverse list of companies and I’ve picked what may be the top seven picks for investors looking for a place to get keep their portfolio growing in a market beset by stagflation.
| GLW | Corning | $31.48 |
| VZ | Verizon Communications | $37.83 |
| WY | Weyerhauser | $29.67 |
| EXR | Extra Space Storage | $154.74 |
| CHK | Chesapeake Energy | $78.64 |
| CF | CF Industries | $69.64 |
| UNP | Union Pacific | $201.23 |
Corning (GLW)
Corning (NYSE:GLW) sells its products through several channels. Its products have applications in many markets.
This makes the company less affected by weakness in any one sector. Plus, an overview of Corning’s financials shows it distributes its revenue, which was about $14 billion in 2022, relatively evenly across all of its channels.
That means investors can count on Corning to deliver consistent revenue and rising earnings. This can offset the fact that at 29x earnings, investors are paying a premium for GLW stock.
Analysts project earnings growth of 20.5% which should help fuel the projected 20% upside for GLW stock. The earnings growth should also be enough to support the company’s dividend. Corning currently offers an attractive 3.5% yield and has been increasing its dividend for the last 13 years.
Verizon (VZ)
Verizon Communications (NYSE:VZ) is becoming an increasingly polarizing stock.
Some investors point out, perhaps correctly, that the company operates in a very competitive business where there’s little to differentiate one company from another aside from price. And that will likely eat into earnings.
The company continues to have a juicy dividend that currently yields 6.98%. Verizon has increased its dividend in each of the last 18 years. Analysts are projecting earnings growth of 0.21% this year.
That’s not spectacular, but it’s “enough” growth to continue increasing the dividend. With that in mind, Verizon is a compelling stock for income-oriented investors.
Analysts are forecasting a 25.3% upside in VZ stock in the next 12 months. The dividend and potential stock price growth may not be enough to attract you. But the icing on the cake may be that Verizon trades at just 7.28x earnings which makes it very undervalued to the market.
Weyerhauser (WY)
Weyerhauser (NYSE:WY) is a conglomerate in the forest products industry. This is a cyclical industry, but as Chris Lau analyzed for InvestorPlace in January, the cycle is likely to work in Weyerhauser’s favor.
Customers will need to replenish inventory. And they are likely to ensure they have enough lumber on hand with the trucking and logging industries still not firing on all cylinders.
Weyerhauser’s first quarter earnings report suggests that expectation is on target. The company posted earnings per share (EPS) of 21 cents per share which was far above the 12 cents per share expected. Revenue also beat expectations, coming in at $1.90 billion which was larger than the $1.86 billion expected.
That may explain why analysts are forecasting 45.78% earnings growth in 2023. And that also supports expectations for 27.8% share price growth for WY stock.
Weyerhauser has a dividend yield of 2.63% and has a P/E ratio of around 16x earnings.
Extra Space Storage (EXR)
Extra Space Storage (NYSE:EXR) is a real estate investment trust.
Investors have to be selective with REITs at the moment, but Extra Space Storage looks like a sound bet. One of the company’s core businesses is in the public storage space. Revenue for self-storage units tends to be sticky as consumers will always need a place to store their stuff.
The company agreed to purchase LifeStorage in April. The deal is expected to close in the second half of 2023. That may keep some pressure on the company’s earnings. That may be why analysts are projecting “only” 5% earnings growth this year.
After the merger is complete the combined companies will make Extra Space Storage “the targest storage operation in the country with over 3,500 locations, over 264 million square feet and serving over two million customers.”
Still, when investors are keenly interested in earnings, EXR stock looks like a good buy. It’s trading at around 23x earnings which is in line with the broader market.
It also comes with an attractive dividend that currently has a 4.29% yield and has been increasing for 14 consecutive years.
Chesapeake Energy (CHK)
For the next stock on my list of top blue-chip stocks to buy I’m looking at the energy sector. Specifically, a very undervalued Chesapeake Energy (NYSE:CHK) which is trading at just 2.4x earnings.
Falling crude oil prices have been making oil stocks look attractive once again. You know about the big oil names that have been generating large profits and issuing share buybacks and generous dividends to its shareholders.
But if you’re looking for a real value in the sector, you may want to look at CHK stock. As many investors remember, the company came out of bankruptcy in 2021. Since then, investors have been rewarded with an 85% return not including the company’s dividend.
The company had a blowout year in 2022 as natural gas prices soared. 2023 has been a different story and the company’s forecasts are for lower output. Still institutional investors bought the stock at a 2:1 clip in the last 12 months.
That’s likely to put a floor on CHK stock and investors can capture a solid dividend with a 2.86% yield.
CF Industries (CF)
CF Industries (NYSE:CF) is a U.S.-based producer of agricultural fertilizers.
The company should benefit at a time when the government is looking to ensure that companies can onshore their supply chains.
That’s not reflected in the CF stock price. The stock is down 31% in the last 12 months and about 20% in 2023 alone.
At some point investors will look to value and that’s where CF Industries is likely to shine. The stock is trading at just 4.37x earnings. That’s down from the 7x earnings it was at just a few months ago.
But sometimes stocks are cheap for a reason. Is that the case with CF stock? It could be. Of all the stocks on this list, it’s the only one that is projected to have negative earnings growth in 2023. But analysts still project a 44% upside for the stock.
That and a dividend with a 2.86% yield that is well supported by the company’s free cash flow makes this a compelling buy.
Union Pacific (UNP)
Union Pacific (NYSE:UNP) is the last stock on my list of the top blue-chip stocks to buy now.
Railroad stocks have been under pressure as the supply chain issues that emerged during the pandemic are still getting untangled. Union Pacific hasn’t been spared. UNP stock is down nearly 40% in the last 12 months.
There are signs, however, that the stock may be bottoming. And that may be because the spending from the government’s Infrastructure Bill is working its way into the economy.
That would be bullish for railroad stocks in general. Although analysts only forecast about 9% growth in UNP stock, the company has a stable dividend that currently yields $2.64 percent. It also has an annual payout of $5.20 per share.
And it’s increased its dividend for 16 consecutive years. That streak will continue as the company has pledged to pay 45% of its future earnings as a dividend to shareholders.
On the date of publication, Chris Markoch 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.