When it comes to building an investment portfolio of shares it's important to first build a core of leading blue-chip companies that offer defensive earnings streams and dividends by virtue of their dominant market positions.
These are the kind of household names that sell high-quality products and services that are likely to be in demand through even the toughest of economic environments.
Due to their defensive nature and size blue chip companies are generally able to pay reliable dividends that will often form a substantial part of an investor's total returns. A blue-chip share should also have a long track record of profit growth to provide investors comfort that over the long term their investments are likely to rise in value.
Below I have three blue-chip shares that tick the boxes for dividend-seeking investors at current share prices.
The Wesfarmers Limited (ASX: WES) share price looks decent value at $42.80 as its Coles supermarkets deliver consistent same-store sales growth thanks to their strong competitive position. The group also operates the highly profitable and fast growing Bunnings Warehouse businesses with plans to expand into the UK.
Analysts are forecasting that Wesfarmers will earn $2.64 per share in FY 2017, which places on it around 16x estimated forward earnings with a fully franked 4.8% dividend yield. Given the defensive nature of this business that looks reasonable value.
The Commonwealth Bank of Australia (ASX: CBA) share price looks reasonable value at $83.10 as this best-in-class bank offers investors quality and defensive dividend streams. The CBA share price has not outperformed its Big 4 peers over the last 10 years for nothing, as its superior technology, cost control, and market positioning continue to deliver investors superior returns.
The bank trades at 14.6x analysts' estimates for earnings per share in FY 2017 with a fully franked dividend yield of 5%. It's hard to go past the CBA as a core holding for any defensive investor seeking consistent dividend payments.
The Ramsay Health Care Limited (ASX: RHC) share price has been sliding recently, but this provides savvy investors an opportunity to grab a discounted slice of what is arguably the ASX's most defensive growth share.
Ramsay's share price is up 269% over the past five years while dividends have doubled. For a blue-chip business offering defensive revenue and profit streams you can't ask for more than that and at $68.40 the business trades on 26x analysts' estimates for $2.63 in earnings per share in FY 2017, with a 1.9% fully franked dividend yield.
For blue-chip share seekers it's hard to go past some of the companies above, but the other key to a blue-chip retirement is managing your investments to maximise your returns, which is where the below report comes in…..
