Every stock portfolio needs exposure to blue-chip stocks. While many investors choose to ignore them in favour of stocks capable of greater growth, these large-cap stocks play a vital role in the longevity of your portfolio.
To begin with, blue-chip stocks represent the stronger, more established corporations. More often than not, they offer products or services that society simply cannot do without and are thus better positioned to survive through even the toughest economic conditions. In addition to their defensive nature however, they normally also offer terrific dividend yields which provide investors with a regular stream of income.
However, investors are currently facing a problem. Many of Australia's most popular blue-chip stocks have rallied so strongly in recent years that they are now widely considered to be overpriced. In fact, given their high valuations, some of them could actually be the first ones to tumble in the case of a market downturn…
As such, I've compiled a list of four blue-chip stocks I believe still hold good value today. Each offer safety as well as a juicy dividend yield…
- Coca-Cola Amatil Ltd (ASX: CCL): In my opinion, Coca-Cola Amatil should be one of the first buys on every investors' shopping list. While a number of short-term issues are blinding investors, (capital 'F') Foolish investors are recognising the brand's strengths and the long-term possibilities for such a high-quality corporation. It is expected to yield around 4.7%, franked to 75%.
- BHP Billiton Limited (ASX: BHP): The mining sector has largely been ignored by investors as global demand for commodities has slowed down. However, 'The Big Australian' still has plenty to offer. In fact, Deutsche Bank believes there is a 14% upside for the shares over the next 12 months, in addition to its fully franked 3.4% dividend yield.
- Washington H. Soul Pattinson and Co. Ltd (ASX: SOL): Soul Patts, as it is often called, is another blue-chip in my portfolio. It has a very strong resemblance to Warren Buffett's Berkshire Hathaway in that it invests in high quality corporations across a range of industries, and holds on for the ultra-long term. With its strong track record for outpacing the market's returns, Soul Patts is a solid bet for any portfolio – particularly with its fully franked 3.2% dividend yield.
- ResMed Inc. (CHESS) (ASX: RMD): ResMed, which develops and manufactures products for the treatment of respiratory disorders, is set to benefit from the growing rate of obesity and sleep apnea in our society. The company boasts an incredible history for improving revenue and earnings and offers a 2.2% yield.
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As attractive as each of these companies are, none of them offer a dividend anywhere near as attractive as the big four banks or Telstra Corporation Ltd.
