Daily Gains Letter

Why Blue-Chip Dividend Stocks Always Make Sense

By for Daily Gains Letter |

Blue Chip Dividend StocksIn the first quarter, we witnessed a market shift back to higher-beta technology, growth, and small-cap stocks as investors searched for higher potential profits. Yet while this investment strategy makes sense, you also need to make sure your portfolio is diversified across numerous sectors and stocks with varying market caps, including dividend-paying stocks.

Dividend stocks may not have the upward explosiveness of smaller technology stocks or the large-cap momentum stocks like FaceBook, Inc. (NASDAQ/FB), Twitter, Inc. (NYSE/TWTR), and Netflix, Inc. (NASDAQ/NFLX); but you know the large-cap blue-chip dividend stocks found on the Dow Jones Industrial Average and S&P 500 offer long-term confidence for investors.

Whether you are starting out on your investment plan or are a seasoned investor, you should always have some funds stashed away in these safer and proven dividend stocks. I would rather play my safe money in the blue-chip dividend stocks than bonds in the long-term.

Proven Dividend Stocks to Watch

When I talk about the proven long-term dividend winners, I’m talking about the likes of Wal-Mart Stores, Inc. (NYSE/WMT), The Procter & Gamble Company (NYSE/PG), and Colgate-Palmolive Company (NYSE/CL). Take a look at their long-term charts, and you’ll see what I mean. These companies sell goods that are always needed by consumers, whether in good times or bad. They also have the financial resources to withstand economic weakness.

In cases when there have been operational issues with these dividend stocks, they generally have been able to pull out of it and rally. Two such companies that faced major issues but managed to subsequently recover are McDonald’s Corporation (NYSE/MCD) and General Electric Company (NYSE/GE). If you bought these two dividend stocks after their major weakness, you would have made tons of money.

When searching for these blue-chip dividend plays that are currently facing some operational issues, a great option would be to monitor the dogs of the Dow—a strategy used to buy out-of-favor large-cap Dow stocks with the highest dividend yields driven by a weak share price.

Of course, there is no guarantee of success, but over time, there’s a good chance these companies will be able to turn around.

Top 8 Dogs of the Dow

As of April 8, the eight top dogs of the Dow with the highest dividend yields:

AT&T (NYSE/T) 5.70% yield

Verizon Communications Inc. (NYSE/VZ) 4.40% yield

Chevron Corporation (NYSE/CVX) 4.10% yield

General Electric Company (NYSE/GE) 3.70% yield

McDonald’s Corporation (NYSE/MCD) 3.50% yield

Pfizer Inc. (NYSE/PFE) 3.30% yield

Intel Corporation (NASDAQ/INTC) 3.10% yield

Microsoft Corporation (NASDAQ/MSFT) 3.10% yield

The key is patience and understanding that these companies have proven themselves over time and are not under any threat to disappear.

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