In the investing world, blue-chip stocks are those that command a dominant position in their respective industries, issued by companies that offer a unique blend of stability and reliability. While blue chips typically don't offer the explosive growth potential seen in emerging tech industries, they compensate with a dependability many investors find comforting.
As we navigate an era where financial opportunities can seem both boundless and unpredictable, anchoring one's portfolio with some of the top blue-chip stocks is imperative in paving the way for sustained portfolio growth.
Coca-Cola
Coca-Cola (KO), known for quenching global thirsts with its iconic beverages, is a blue-chip stalwart. Its stable of product offerings have become cultural symbols, underscoring its resilience in the market and continuing to entice buy-and-hold investors with its reliable legacy and refreshing potential.
KO hasn't been the greatest wealth compounder over the years. Down 3.5% year-to-date, it pales in comparison to the 17.7% gain for the S&P 500 Index ($SPX). However, for those with an eye for value, this could be a golden opportunity to scoop up a top dividend stock.
Coca-Cola's second-quarter results highlight its resilience. It delivered an 8.3% earnings surprise, with earnings-per-share of 78 cents beating estimates by six cents. In three of the past four quarters, the firm has posted an earnings surprise, a testament to its stellar execution.
Delving deeper, the 11% organic sales growth emerges as a standout metric, fueled by heightened demand and pricing for its diverse brands, despite stagnant sales volumes. Consequently, KO raised its sales projections for 2023, and now anticipates full-year adjusted organic revenue growth between 8% and 9%.
While the 20.1% operating margin came in behind last year's 20.7%, KO's strategic cost-cutting measures have, by and large, effectively safeguarded its margins.
Furthermore, Coca-Cola shines as a dividend king, having bolstered its payouts for an impressive 60 consecutive years. With an annual payout of $1.80, KO stock boasts a solid 2.98% yield with a payout ratio of around 69%, hinting at potential room for further generosity. Notably, its recent 1-year dividend growth of 4.6% eclipses its 5-year average of 3.3%, a testament to the company's commitment to its shareholders.
Out of the 14 analyst ratings on the stock, a compelling 11 tag it as a “Strong Buy.” One leans towards a “Moderate Buy,” while two suggest a “Hold.” The average 12-month price target of $70.07 implies expected upside of about 16% from current levels. Furthermore, hedge funds also seem bullish, as they collectively increased their KO exposure by over 510,000 shares in the recent quarter.
Apple
In the tech realm, Apple (AAPL) stands out as a leader for its innovation and its unmatched array of products, including its flagship iPhone.
Throughout the first half of 2023, Apple stock buyers charted a bullish course. The buzz surrounding artificial intelligence (AI) drove new enthusiasm for the tech sector after a volatile 2022, and investors scooped up shares of market leader AAPL in droves. Additionally, traders responded zealously to new product announcements, such as the Vision Pro headset.
Consequently, AAPL has delivered a nearly 45% gain year-to-date, easily outperforming the S&P 500. It’s important to note that after lagging the SPX by a wide margin in the fourth quarter of 2022, AAPL came back strong, and has consistently outpaced the S&P 500 since early in the first quarter of 2023.
Apple followed up its earnings surprise in the second quarter with another robust showing in the third quarter. Apple reported earnings of $1.26 per share, beating analysts' estimates, and revenue of $81.8 billion arrived right in line with estimates - but investors reacted poorly to a narrow miss on iPhone sales.
Amidst the headlines about the iPhone miss, investors may have missed that Apple's Services revenue surpassed expectations, rising more than 8% to $21.2 billion. Also, CEO Tim Cook announced a milestone of over 1 billion active paid subscriptions.
Apple also maintained its dividend payout for shareholders, announcing a payout of 24 cents per share. Furthermore, despite the drop in sales, it spent a whopping $18 billion on share repurchases in the most recent quarter. Since 2012, the tech behemoth has spent more than $570 billion in share buybacks since 2012.
Looking forward, the buzz around AAPL is palpable as the September 12 date approaches for the iPhone 15 unveiling. Ahead of this catalyst, top Apple analyst Ming-Chi Kuo predicts a stock rebound. He believes the iPhone 15's launch might boost Apple's shares, and says the company could eventually dethrone Samsung by selling a projected 250 million units in 2024.
Likewise, AAPL has room to rally, based on analyst targets. The stock trades roughly 8.7% below the average analyst price target of $205.07, and the consensus rating from 29 analysts is a “Moderate Buy.” In fact, 18 of those 29 analysts suggest that the stock is a “Strong Buy” at this time.
Takeaway
Coca-Cola and Apple - both iconic brands in their respective sectors - continue to live up to their blue-chip status. Coca-Cola continues to be a dividend heavyweight with six decades of consistent payouts, while Apple stands out with its impressive year-to-date gains and innovative leadership. At current levels, investors can feel confident buying into their robust track records and the bullish sentiments expressed by market analysts.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
