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Why I think it’s time to sell these ‘safe’ blue chips

One of the older pieces of investing advice is to invest in blue chips and hold them for the reliable dividends they pay.

Some people may have decided to avoid cyclical shares like Commonwealth Bank of Australia (ASX: CBA) and BHP Billiton Limited (ASX: BHP) for more consistent industries like energy and telco utility operators.

But, going for ‘safer’ doesn’t appear to have been the safest choice. Telstra Corporation Ltd (ASX: TLS) shareholders have seen an enormous deterioration of strength of the business.

The same could soon be said of Origin Energy Ltd (ASX: ORG) and AGL Energy Ltd (ASX: AGL). The two energy businesses used to be a simple investment offering: regular customer cashflow every few months.

However, there’s a list of reasons for uncertainty surrounding them these days.

Firstly, their customers are now competition. Every household that installs solar panels means less electricity for the energy giants to sell. Those households could be selling energy back into the system if they generate excess energy. This trend is only going to continue as the cost of solar panels reduces further.

The government wants to put a price cap on electricity prices. This would likely be a good thing for households, however it will almost certainly crimp profits.

That wasn’t the only threat. The government has also threatened forced divestment on the energy sector. However, this seems unlikely with Labor, states and business all not liking that idea.

Foolish takeaway

If I’m going to invest in a large ASX business I want to see that it is good long-term growth potential as well as downside protection.

However, AGL and Origin don’t seem like reliable investments to me at the moment. AGL’s dividend yield of 6.3% is not enough to attract me to it.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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 Scott Phillips.