Judging by the wide shareholder ownership of mining giants BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) it’s safe to say many Australian investors appear to be in love with these two diversified miners.
I’ll admit that their low-cost producer status is indeed a competitive advantage and an appealing attribute, however their reliance on the ups and downs of commodity prices still poses a significant risk. I’d suggest it’s debatable whether BHP and Rio really are ‘blue chip’. In short, they are very cyclical businesses and perhaps not ideal holdings for many investors, particularly retirees.
In contrast, there are a number of ‘blue-chips’ which have a much more stable revenue and earnings base and as a consequence a more stable dividend payout. This is particularly important for many SMSF (self-managed supers funds) who may require a steady stream of income.
The following four blue-chip stocks all offer a good combination of dividends and growth.
1) Woolworths Limited (ASX: WOW) has a superb track record of year-after-year growth in dividend payments. The company’s entrenched customer base and non-discretionary nature makes for a very defensive business model.
2) Wesfarmers Ltd (ASX: WES) – whilst Wesfarmers does have a degree of cyclicity mainly due to its exposure to coal, the cyclical nature is diminishing as its retail divisions increase in dominance. At the same time the company is poised to grow with the firm’s balance sheet cashed up and management rumoured to be on the lookout for acquisitions.
3) Telstra Corporation Ltd (ASX: TLS) has maintained a 28 cents per share (cps) dividend for nine years, however this year shareholders should see a boost to 29 cps. The defensive nature and reliability of this dividend payment is what has made income-seeking investors flock to this dependable stock in the low interest rate environment.
4) Brambles Limited’s (ASX: BXB) dividend hasn’t been completely smooth but its globally diversified earnings base, coupled with its growth profile arguably makes this stock a great addition to a worry-free retirement portfolio.
A grossed-up yield of 7%... plus double-digit profit growth!
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.