We all know that blue chip stocks form a vital part of any investor's portfolio. They not only provide a solid base and defensive structure, but usually also a steady flow of income in the form of dividends. However, with the S&P/ASX 200 (INDEXASX: XJO) index hovering near its highest point since the GFC, it is perhaps more important than ever that investors scrutinise each stock carefully before buying.
Westfield Corp (ASX: WFD), Telstra Corporation Ltd (ASX: TLS) and BHP Billiton Limited (ASX: BHP) are amongst the top ASX blue chip stocks most investors would consider buying. But at today's prices, are they worth the time and effort?
Westfield Corp
Created as a result of the Westfield restructure, Westfield Corp now owns and operates all of Westfield's international shopping centres (excluding those in New Zealand). The stock has risen quite strongly since its June debut and released a pleasing half-year report last week, highlighted by a 4.2% increase in specialty sales growth and a portfolio lease rate of 94.4%. Although it trades on a P/E ratio of 18.9x, the price seems justifiable considering its strong growth prospects internationally, and particularly in the recovering US and UK economies.
Telstra Corporation Ltd
Australia's largest telecommunications provider, Telstra, has gone from strength to strength in recent years, reflected in its fantastic shareholder returns in that time. The company has grown its customer base and improved its customer service levels, while it has also increased its annual dividend from 28 cents to 29.5 cents – a decision which was warmly welcomed by the market. Although the company stands to continue benefiting from growing trends such as cloud computing, I don't necessarily think it is a stand-out buy right now with the stock trading near a 10-year high at $5.67.
BHP Billiton Limited
Unlike Westfield and Telstra, BHP Billiton hasn't been travelling so well as of late. Plummeting iron ore prices have dragged the miner's share price down considerably, leaving many investors to wonder just how far it will fall.
Thankfully, BHP's operations are highly diversified while its low cost base will enable it to remain profitable even if the iron ore price does drop as low as US$75, as some analysts are expecting. While the stock could certainly fall further in the coming weeks, or even months, now may be a good opportunity for investors to buy shares in a high-quality Aussie company. In addition, it offers a fully franked 3.6% dividend yield.
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Of the companies mentioned above, Telstra offers by far the greatest dividend, but while it is questionable whether there is value to be recognised in buying the shares today, investors ought to look elsewhere for more compelling opportunities.
