Over the past year, many of Australia's largest blue-chip stocks have risen strongly in value and rewarded shareholders handsomely.
So for those new to the market, it can be tough to get stock ideas and know what to buy and what to avoid. Here are five of income investors' favourite blue chips stock, from the S&P/ASX 200 Index (ASX: XJO) (INDEXASX: XJO), which should be on your watchlist and, maybe, in your portfolio.
1. Telstra Corporation Ltd (ASX: TLS) is Australia's favourite telecommunications company. With growing revenues from the network application services division and a focus on international growth, Telstra shares have recently punched through their 10-year high to trade at $5.45. Although it holds promise, at current prices, I believe Telstra shares are fully valued and are not a standout buy.
2. BHP Billiton Limited (ASX: BHP) is our country's biggest company and the world's premier diversified miner. In addition to the ASX, it is also listed on the stock exchanges of London, New York and Johannesburg. It recently released a solid set of production results and although earnings are expected to drop this year, it could prove to be a good investment at today's prices.
3. Macquarie Group Ltd (ASX: MQG) is our top investment bank. It has operations spread right throughout the world and derives over 68% of its income from outside Australia and New Zealand. Macquarie's most profitable services are funds management and corporate finance but it has a number of smaller, highly profitable businesses which provide the company with solid long-term growth prospects.
4. Australia and New Zealand Banking Group (ASX: ANZ) is also busy pushing into international markets, particularly Asia, where it sees massive opportunities within the growing middle-class population. It is the only "major" Australian bank seeking to actively compete with other international banks and local lenders throughout the region. Through its International and Institutional Banking division, ANZ hopes to grow foreign revenues to between 25% and 30% of the group's total. However, like Telstra, ANZ shares have become quite rich and I believe they are best left on your watchlist, for now.
5. National Australia Bank Ltd (ASX: NAB) is another iconic business with global presence but, unlike Macquarie and ANZ, its international operations are more of a hindrance on group earnings than shareholders would like. Although it holds more than 22% of Australia's business lending (according to APRA) and 30% of agribusiness, it hasn't been enough to counteract the struggling UK businesses. Despite a big dividend yield, NAB is a much riskier bet than its major bank peers and not one for the fainthearted.
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Whilst I believe ANZ and Telstra have promising growth strategies, I can't help but think investors will get the opportunity to buy shares cheaper at some point in the future. Probably when interest rates rise. At current prices I believe BHP is the best buy, followed by Macquarie but they too are not bargains at today's prices.
