MENU

Are you missing out on bargains by buying Australia’s 5 favourite blue-chips?

As a little hobby of mine, I’ve been watching a number of investing websites ‘most searched shares’ to find out which are Australia’s most sought-after companies. An a priori guess on my part included our biggest bank, two supermarkets, a petroleum producer, and a mining giant; the truth was a little surprising.

Over the past couple of months, the companies in the top five most searched shares across four websites were consistently (in varying order):

1)      Commonwealth Bank of Australia (ASX: CBA)

2)      BHP Billiton Limited (ASX: BHP)

3)      Westpac Banking Corp (ASX: WBC)

4)      Australia and New Zealand Banking Group  (ASX: ANZ)

5)      Telstra Corporation Ltd (ASX: TLS)

The appeals are obvious – 5% dividend yields (apart from BHP), 100% franking, dividend consistency and enormous investment security. Brand power and name recognition probably also play a significant role. These five companies all get a big tick from me. The thing is, everybody knows of their potential. These are the five most searched companies in Australia, there is a lot of investor interest surrounding them, and they are almost always fully valued or overpriced.

If its blue-chips and security you’re after, why not look for a few slightly less popular names?

Macquarie Group Ltd  (ASX: MQG) pays a 4.2% dividend with 40% franking, but investors should enjoy rising dividends and company earnings over the coming years thanks to Macquarie’s flagged 40% rise in profit this coming year. Investors should also know that Macquarie runs its business conservatively, and has a streak of unbroken profitability over 40 years long.

Woodside Petroleum Limited (ASX: WPL) pays a 5.4% dividend with 100% franking, and has enviable exposure to the Liquefied Natural Gas (LNG) and oil industries, with regularly expanding revenues thanks to increasing demand for their product. Woodside featured fairly often in the most searched companies’ lists, but still appears fairly valued, if not slightly on the cheap side. Its recent Q1 report showed an impressive 15% rise in revenues over the prior corresponding period. Woodside has long been a staple stock for investors, and for petroleum/LNG exposure it’s hard to get much better.

Coca-Cola Amatil Ltd (ASX: CCL) has disappointed investors recently by revising profits down 15% for the year, but that looks likely to reverse in the future as growing revenues in Indonesia and from the Australian beer market take hold. The recent ‘strategic review’ announced by the company tacitly admitted that Coca Cola needs to ‘challenge its model thoroughly’ to improve competitiveness going forward. Expecting last year’s dividend of 5.9% (75% franked) at today’s prices may be a little optimistic, but disappointing earnings are well and truly priced into the company, with it trading around five-year lows.

Foolish takeaway

Despite being searched less frequently, the last three companies listed here are just as ‘blue-chip’ as the first five. Blue-chips almost always trade around fair value as a result of their size and name recognition, but if you look around for the less well known ones, you increase your chances of getting a better price. The ASX-50 list is starting to look a little expensive at the moment, but there are fairly priced shares to be had if you’re willing to look a little further.

Get our top dividend stock for 2014 - FREE!

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2014."

Motley Fool contributor Sean O’Neill doesn’t own shares in any company mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.