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Tags: blue-chip | high-dividend stocks | caterpillar | ameriprise financial | target

Bob Ciura: 3 Blue Chips for Safe Income

Bob Ciura: 3 Blue Chips for Safe Income
CAT construction machines made by Caterpillar are readied for export to Asia at the Port of Tacoma in Tacoma, Wash. (AP)

Bob Ciura By Thursday, 08 September 2022 03:16 PM EDT Current | Bio | Archive

The term “blue-chip” typically refers to companies with strong business models that generate consistent profits, and pay high-dividend yields to shareholders. These are generally seen as safe stocks that can continue to pay dividends from year to year, even during recessions. Blue-chip stocks are generally known as the highest-quality dividend stocks.

This article will discuss 3 blue-chip stocks that have long histories of increasing their dividends, leadership positions in their respective industries, and solid dividend yields above the S&P 500 average.

Caterpillar Inc. (CAT)

Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The $96 billion market cap company operates in three primary segments: Construction Industries, Resource Industries and Energy & Transportation, along with ancillary financing and related services through its Financial Products segment.

On August 2nd, 2022, Caterpillar reported its Q2 results for the period ending June 30th, 2022. For the quarter, the company generated revenue of $14.3 billion, a 10.5% increase compared to the $12.9 billion generated in the second quarter of 2021. Construction Industries, Resource Industries, and Energy & Transportation posted growth of 7%, 16%, and 15%, respectively. The increase was primarily due to favorable price realization and higher sales volume. Higher sales volume was driven by the impact from changes in dealer inventories, as dealer inventory decreased more during the second quarter of 2021 than during the second quarter of 2022.

Adjusted earnings-per-share came in at $3.18 against $2.60 in the comparable period last year, recording a notable improvement. This was due to a lower effective tax rate and a lower share count. Caterpillar returned $1.7 billion to shareholders through dividends and share repurchases during the quarter, ending with $6.0 billion of enterprise cash. Shares currently yield 2.6%.

Ameriprise Financial (AMP)

Ameriprise Financial operates in the financial sector. It is one of the leading wealth & asset managers. The company has over $1 trillion in assets under management. Some of its services include banking, brokerage, and insurance services. Its asset management division operates under the Columbia Threadneedle Investments brand, and services high net worth individuals and institutional investors.

Ameriprise has generated growth in 2022. In the second quarter, revenue grew 2.6% to $3.51 billion and was $100 million better than expected. Adjusted earnings-per-share of $5.81 compared favorably to the prior year’s result of $5.27 and was $0.25 above estimates. Total assets under management, or AUMs, decreased 7.7% to $1.2 trillion as market deprecation more than offset inflows for the quarter. Client assets for the Advice & Wealth Management fell 9% to $735 billion.

The company has averaged 19% annual earnings-per-share growth in the past decade. We expect 8% earnings-per-share growth from the company going forward. Earnings growth will be fueled by increasing revenues and share buybacks.

Ameriprise has developed a strong brand, which makes for a durable competitive advantage in a highly competitive industry. The company’s performance has remained concrete despite the ongoing volatility in capital markets so far in 2022. The stock has a current dividend yield of 1.8%.

Target Corporation (TGT)

Target was founded in 1902 and after a failed bid to expand into Canada, has operations solely in the U.S. market. Its business consists of about 1,850 big box stores, which offer general merchandise and food, as well as serving as distribution points for the company’s burgeoning e-commerce business. Target has a market capitalization of $78 billion and should produce about $110 billion in total revenue this year.

In the most recent quarter, adjusted earnings-per-share came to 39 cents, which missed estimates by 33 cents. Revenue was $26 billion, up 3.5% year-over-year, as comparable sales were up 2.6%. Strength came from food & beverage, as well as beauty, and household essentials.

We see continued comparable sales growth as driving results, along with sizable margin expansion from low levels in 2022, and a tailwind from share buybacks. Target’s digital efforts are also working extremely nicely, as we saw again in 2021 results, and the company’s small-format stores are performing very well, opening a new avenue of growth for the company in the coming years.

Target is a shareholder-friendly company. The company has $9.7 billion remaining on its share repurchase program. The stock also yields 2.5% right now. Target has increased its dividend for over 50 consecutive years, making it a Dividend King.
Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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The term "blue-chip" typically refers to companies with strong business models that generate consistent profits, and pay high-dividend yields to shareholders.
blue-chip, high-dividend stocks, caterpillar, ameriprise financial, target
Thursday, 08 September 2022 03:16 PM
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