Within the realm of investment, blue-chip stocks hold a commanding position in their respective industries, originating from companies that offer a distinct fusion of stability and dependability. Although blue chips may not offer the explosive growth potential synonymous with emerging technology sectors, their reliability often brings solace to investors.
In a landscape where financial prospects oscillate between boundless opportunities and unpredictability, securing a portfolio with top-tier blue-chip stocks becomes paramount in fostering sustained growth.
Coca-Cola: A Beacon of Stability
Coca-Cola (NYSE:KO), renowned for quenching global thirst with its iconic beverages, stands as a steadfast blue-chip contender. Its diverse product lineup has metamorphosed into cultural emblems, underscoring its resilience in the market and continuously captivating buy-and-hold investors with its established legacy and refreshing potential.
While KO hasn’t been a dominant wealth generator over time, registering a 3.5% year-to-date decline, its performance is dwarfed by the 17.7% surge of the S&P 500 Index ($SPX). However, for value-conscious investors, this phase could herald a golden opportunity to acquire a premier dividend stock.
Coca-Cola’s second-quarter performance underscores its durability. Surpassing expectations, it achieved an 8.3% earnings surprise, with earnings-per-share of 78 cents triumphing overestimates by six cents. Demonstrating consistent execution, the company has delivered earnings surprises in three out of the past four quarters.
Diving deeper, the standout metric is the 11% organic sales growth, propelled by elevated demand and strategic pricing for its diverse brand portfolio, compensating for stagnant sales volumes. As a result, KO heightened its sales projections for 2023, now anticipating adjusted organic revenue growth of 8% to 9% for the full year.
Although the 20.1% operating margin trailed last year’s 20.7%, KO’s prudent cost-reduction strategies have effectively safeguarded its margins. Moreover, Coca-Cola shines as a dividend stalwart, elevating payouts for an impressive 60 consecutive years. Sporting an annual payout of $1.80, KO stock boasts a sturdy 2.98% yield with a payout ratio of around 69%, hinting at the potential for further benevolence. Remarkably, its recent 1-year dividend growth of 4.6% surpasses its 5-year average of 3.3%, a testament to the company’s commitment to shareholders.
Among the 14 analyst ratings, a compelling 11 bestow a “Strong Buy” label on the stock. One leans towards a “Moderate Buy,” while two advocate a “Hold.” The average 12-month price target of $70.07 implies an anticipated upside of approximately 16% from current levels. Moreover, hedge funds display optimism, collectively augmenting their KO exposure by over 510,000 shares in the recent quarter.
Apple: Pioneering Tech Innovation
In the technology sphere, Apple (NASDAQ:AAPL) emerges as a frontrunner due to its innovation and a comprehensive array of products, notably its flagship iPhone.
Through the initial half of 2023, investors in Apple stock charted an optimistic trajectory. The buzz surrounding artificial intelligence (AI) revitalized enthusiasm for the tech sector following a volatile 2022, prompting investors to avidly acquire shares of market leader AAPL. Concurrently, traders responded fervently to novel product unveilings, including the Vision Pro headset.
Consequently, AAPL boasts a remarkable year-to-date gain of nearly 45%, substantially outperforming the S&P 500. Notably, AAPL rebounded vigorously after trailing the SPX by a considerable margin in the fourth quarter of 2022, maintaining a consistent outperformance over the S&P 500 since the inception of 2023.
Building on the second-quarter earnings surprise, Apple’s resilience extended into the third quarter. The company reported earnings of $1.26 per share, surpassing analysts’ projections, and achieved a revenue of $81.8 billion in line with estimates. However, investors responded unfavorably to a minor shortfall in iPhone sales.
Amidst the focus on iPhone sales, investors might have overlooked Apple’s exceptional Services revenue, which exceeded expectations, surging by over 8% to reach $21.2 billion. CEO Tim Cook also heralded a significant milestone: over 1 billion active paid subscriptions.
Apple also sustained its dividend payout, declaring a distribution of 24 cents per share. Additionally, despite the sales dip, the company allocated a substantial $18 billion to share repurchases in the most recent quarter. Since 2012, the tech giant has expended more than $570 billion on share buybacks.
Anticipation is palpable as the September 12 date approaches, marked by the unveiling of the iPhone 15. Leading Apple analyst Ming-Chi Kuo predicts a stock resurgence, with the iPhone 15’s launch potentially catalyzing Apple’s shares. He speculates that the company could eventually surpass Samsung by selling an estimated 250 million units in 2024.
Likewise, AAPL exhibits room for a rally, as per analyst projections. The stock hovers approximately 8.7% below the average analyst price target of $205.07. The consensus rating from 29 analysts leans toward a “Moderate Buy,” with 18 of them advocating a “Strong Buy” stance.
Key Takeaway: Stable Investments in Iconic Brands
Coca-Cola and Apple, both iconic figures within their respective sectors, uphold their blue-chip reputations. Coca-Cola’s steadfast dividend legacy, spanning six decades, contrasts Apple’s impressive year-to-date growth and innovative leadership. At current levels, investors can confidently embrace their strong track records, supported by the optimistic sentiments voiced by market experts.
Featured Image: Freepik @ freepik
Author Faith Yakubu