Your instant 5 share defensive portfolio

Wesfarmers Ltd (ASX: WES) shares, APA Group (ASX: APA) shares and Sydney Airport Holdings Ltd (ASX: SYD) shares are quality ASX blue chips.

Why consider blue chips?

If you invest for the long term, it makes sense to buy and hold quality blue chip shares. ‘Blue chips’ are large companies with defensible market shares and services in their respective markets. These features enable them to pay reliable dividends and post modest growth over time.

The ideal holding period of these companies is five years or more.

Here are five blue chip shares to add your watchlist in 2017.

  • Wesfarmers. As the owner of Coles, Bunnings, Kmart, Target and more, Wesfarmers is the top dog in the Australian retail market. Ultimately, modest growth and reliable sales make it an ideal dividend-paying investment. In the year ahead, analysts expect the company to pay dividends equivalent to 4.7% fully franked.
  • APA Group. APA is the Australia’s leading gas infrastructure company, with an extensive national pipeline network, distribution facilities and wind farms. It delivers around half of Australia’s gas usage, a market which could be expected to grow over the long term. It pays a 4.6% dividend unfranked.
  • Sydney Airport Holdings. The owner of Australia’s busiest airport has performed strongly in recent years. However, news of a second Western Sydney Airport, expected to be built by the mid-2020’s, appears to have spooked investors. However, Sydney Airport remains Australia’s busiest international gateway, in our largest city, with foreign and domestic tourism expected to increase. It is tipped to pay a 4.8% dividend.
  • Transurban Group (ASX: TCL) is the number-one owner and operator of toll roads in Australia. Some of its assets and businesses include CityLink, Hills M2, Lane Cove Tunnel and Airport Link M7. It also owns assets in the USA. Toll roads are defensive businesses because it is not easy to replicate an existing road and prices typically increase modestly each year. It has a forecast 4% dividend.
  • Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). WHSP is a conglomerate-style business, owning big chunks of other companies. From coal to telecommunications companies, ‘Soul Patts’ has benefited from savvy long-term investments in quality companies. It is tipped to pay a 2.8% fully franked dividend.

Foolish Takeaway

It’s important to note that even blue chip companies like these five can have their share prices swing wildly from one year to another. However, with a view to the long term, many of these companies could provide a reliable income stream and modest capital growth, in my opinion. 

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Sydney Airport Holdings Limited, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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