The U.S. stock market has been roaring higher lately, even though it has started off August on a tough note. While the S&P 500 has fallen about 2% so far this month, it’s been on a strong run otherwise. Regardless of the next direction, investors should be looking at blue-chip stocks to buy.
Blue-chip stocks should be on investors’ radar whether the stock market is going up or down. The S&P 500 has enjoyed a five-month win streak, gaining more than 21% from the March low to the July high.
At that time, we’ve seen some soaring blue-chip stocks and others that have been stagnant. Ultimately, if the market is going up, investors want to be involved in good businesses. If the market is going down, they especially want to be invested in good businesses.
Ideally, these blue-chip stocks will have growth, a reasonable valuation and a decent dividend. That’s what we have with the three names below.
PepsiCo (PEP)
PepsiCo (NYSE:PEP) has a portfolio of some of the most well-known brands in the world. It has built an enormous portfolio of food and beverage products, doing an excellent job diversifying away from soda. The company has also done an incredible job of being consistent.
The stock has generated a 123% return over the last decade, but when including the dividend, that return swells to almost 200%. Further, the stock’s largest correction over the last ten years was “just” 31% amid the Covid-19 selloff.
While a dip of that size is certainly notable, that’s a pretty good “worst performance” over a ten-year stretch.
In any regard, PepsiCo stock hit all-time highs in May and is less than 5% from doing so again. The stock currently yields 2.7% and the company gave the dividend a 10% boost earlier this year. That marked PepsiCo’s 51st consecutive year with a dividend hike.
For 2023, analysts expect about 7% revenue growth and 10.5% earnings growth.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) reported earnings on July 20, delivering a top and bottom-line beat and strong guidance. It was the second quarter in a row that the firm had done this, yet the stock price didn’t suggest investors were all that optimistic.
Then investors caught on as the stock caught a boost, rallying 6% the day it reported earnings. Then it closed higher for six straight days. Ultimately, the stock rallied over 10% on its earnings results. However, that rally stopped in its tracks on Monday, July 31, as J&J’s talc-related lawsuit bankruptcy plan was rejected a second time.
The stock fell about 4% on the day and hit its highest trading volume since January. Now though, Johnson & Johnson stock has rallied in both August sessions against a declining S&P 500 as bulls buy the dip.
Shares trade at less than 16 times forward earnings, while analysts expect mid-single-digit revenue growth this year and next year and 5% to 6% earnings growth in 2023 and 2024. Further, the stock yields about 2.80% and the firm has raised that dividend for 61 consecutive years.
With the way J&J stock is trading now, bulls may have more control than they thought.
Procter & Gamble (PG)
One blue-chip stock that seems to be flying under the radar? Procter & Gamble (NYSE:PG).
Shares of P&G are up about 9% over the past 12 months, slightly edging out the S&P 500. However, it’s the stock’s recent performance that is turning heads for blue-chip stock investors. The stock has climbed in seven of the past nine weeks, gaining about 10.5% in that span.
In the second quarter, shares topped out around the $157.50 mark, which is right where P&G stock is trying to break out over now. However, if it can clear this area, not much stands in its way from running to the all-time high up near $165.
In April, the company increased its dividend, which marked “the 67th consecutive year that P&G has increased its dividend and the 133rd consecutive year that P&G has paid a dividend.”
While not known for growth, Procter & Gamble is expected to do pretty well in 2023 and 2024. Analysts expect roughly 4% revenue growth this year and next year, alongside 8.30% earnings growth this year and 8.00% growth next year.
On the date of publication, Bret Kenwell held a long position in JNJ. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
