5 Fast-Growing High-Yield Blue-Chip Stocks You Don't Want To Miss (2024)

The 2022 bear market is proving to be one of the most impressive of the last decade.

No one knows when we'll actually bottom (or if we already have) and when the bear market will end. Why? Consider this - If inflation peaks and falls rapidly and we avoid recession (Fed pivots in time), then falling bond yields could cause stocks to hit new highs this year.

In fact, UBS has a 5,300 forecast for the S&P 500 by the end of the year under this exact scenario.

Or as Ritholtz Wealth Management's Michael Batnick recently said, "if we avoid recession and inflation peaks soon, stocks are likely a screaming buy."

OR inflation could fall rapidly due to a recession that 70% of economists, 67% of CFOs, and 76% of CEOs expect next year. That would likely cause earnings estimates to fall 10% to 15% quickly and send the market falling to new lows, with deep value cyclical like energy crashing hardest as they've done in the last two weeks.

BUT if inflation expectations come down quickly (as they have started to) then bond yields could fall rapidly as well. That would likely mean balanced portfolios would benefit from bonds hedging stocks as they have done 92% of the time since WWII.

And guess what many analysts think would also start to act defensively in such a scenario? Tech, which has strong secular growth and is highly rate sensitive.

Or to put it another way, the interaction between inflation, growth expectations, and interest rates could either cause the market to go up a lot by year-end, go down a lot, and tech may or may not turn into a Wall Street darling once more.

How the heck are investors supposed to navigate such a complex and weird economy? By focusing on the five fundamentals they can control.

• The portfolio asset allocation that's right for your risk profile;
• diversified into quality companies;
• that combined pay attractive, safe, and growing dividends;
• with good growth prospects; and
• with reasonable to attractive valuations.

One of the only two certainties in finance is that over the long term, blue-chip companies go up, tracking earnings growth with 97% accuracy over time.

Do you know what market timing gets you? Terrible long-term returns.

Do you know why that is? Because according to studies from JPMorgan, Dalbar, Bank of America, and Citigroup, almost all of the stock market's returns are generated by just a handful of its best daily gaining days.

And 80% of the market's best days cluster within two weeks of its worst days.

According to a new study from Citigroup, over the last 50 years, missing just 2 of the market's best days each year reduced annual returns by 80%, from 10% to 2% per year.

According to Fidelity, 98% of day traders lose money, and this is likely why.

It's just not possible to consistently jump in and out of the market, and if you try, you risk destroying your retirement dreams.

According to Bank of America, missing just 10 of the best single days of each decade reduces 1,150X inflation-adjusted returns over the last 90 years to -94% total returns.

Time in the market is far more important than timing the market - the most important fact on Wall Street.

Or to put another way, rather than fear and hate market volatility, learn to embrace it and harness it for your benefit, or at the very least, tolerate it.

Because the bear market of 2022 has created these kinds of incredible fast-growing, high-yield bargain hunting opportunities.

5 Fast-Growing High-Yield Blue-Chip Bargains You Don't Want To Miss

I was able to find these five companies in three minutes using the Dividend Kings Zen Research Terminal and the following screening parameters.

• Reasonable buy or better
• 3% yield or higher
• 15+% consensus long-term return potential or better
• 81+% dividend safety (very safe, 2% or less risk of a cut even in a severe recession, 0.5% risk in an average recession)
• 80+% quality (SWAN, Super SWAN, and Ultra SWAN quality companies)

I then sorted by yield and selected one company in all six sectors that passed the screen.

I then used the watchlist creator tool to narrow the screen to just these five companies.

Total time: 3 minutes

So here are five incredible fast-growing, high-yield blue-chip bargains to consider.

• ONEOK (OKE) - no K1 tax form
• Manulife Financial (MFC)
• V.F. Corp. (VFC)
• Broadcom (AVGO)
• Cummins (CMI)

I've linked to articles providing a deeper look at each company's growth prospects, investment thesis, risk profile, valuation, and total return potential.

But here's the bottom line upfront.

FAST Graphs Upfront

ONEOK 2024 Consensus Total Return Potential

Manulife 2024 Consensus Total Return Potential

V.F. Corp. 2024 Consensus Total Return Potential

Broadcom 2024 Consensus Total Return Potential

Cummins 2024 Consensus Total Return Potential

• Average 3-year consensus total return potential: 23% CAGR
• Buffett-like return potential from blue-chip bargains hiding in plain sight

Why I Trust These Companies And So Can You

These aren't just blue-chips, they are some of the world's potentially best Super SWANs (sleep well at night). How can we tell? By comparing their quality against the dividend aristocrats.

(Source: DK Zen Research Terminal)

These blue-chips have an average dividend growth streak of 17.2 years, approaching the Ben Graham standard of excellence (20+ years).

S&P estimates their average 30-year bankruptcy risk at 4.5%, a BBB+ stable credit rating.

They offer not only an attractive 4.8% yield, but one of the safest 4.8% yields on earth, in my opinion.

(Source: DK Research Terminal)

During the average recession since WWII, the risk of these Super SWANs cutting their dividend is about 0.5%. In a severe recession, such as the Pandemic or Great Recession, the risk is about 1.4%.

• A mild recession is expected by most economists and CEOs in 2023
• According to Deutsche Bank, potentially the 2nd mildest in US history
• -0.5% GDP growth in 2023 vs -0.4% in 2001's recession

Joel Greenblatt is, in my opinion, one of the best investors in history, generating 40% annual returns for 21 years at Gotham Capital. He considered return on capital his gold standard for quality and moatiness.

The dividend aristocrats average 100% return on capital over the last year, compared to 14.6% for the S&P 500. These five high-yield blue-chips average:

• 212% ROC over the past year (15X better than the S&P 500)
• ROC in the 92nd percentile of their respective industries (wide moat)
• 13-year median ROC of 55% (a wide and improving moat)

Six rating agencies rate these fast-growing high-yield blue-chips in the 75th industry percentile on long-term risk management. What does that actually mean?

World-Class Risk-Management

(Source: DK Research Terminal)

OK, so now you can see why I believe these are five of the world's highest quality and most dependable dividend growth stocks, and here's why you might want to buy them today.

Wonderful Companies At Wonderful Prices

The S&P 500's forward P/E is 16.4%, 2% historically undervalued.

These high-yield blue-chips are trading at 10.5X earnings, a 28% historical discount. For context, the last time the S&P traded at such levels was in the Great Recession.

Analysts expect these high-yield blue-chips to deliver 38% total returns in the next 12 months. And they are so undervalued that fundamentals would actually justify a 45% total return in the next year.

But I'm not trying to help you score a quick 38% return or even a 45% one-year gain. My goal is to help you retire in safety and splendor and here's how they can do that.

Long-Term Return Potential That Can Help You Retire In Safety And Splendor

Not only do these fast-growing blue-chips yield 4.8% but they are also growing at almost 13% per year.

What does that mean? 17.5% long-term consensus return potential.

(Sources: Morningstar, FactSet, YCharts)

Not only do these blue-chips yield almost 5% but analysts think they could potentially beat every almost other popular investing strategy. Not just the dividend aristocrats and S&P 500 but even the Nasdaq.

But what about when things go wrong as they always do?

This is where these blue-chips' inflation and risk-adjusted expected return of 9.2% come in.

• adjusting for the risk of these companies not growing as expected
• going bankrupt
• and inflation

That's compared to 4.7% risk and inflation-adjusted expected returns from the S&P 500. And here's why this matters.

These high-yield blue-chips can potentially double your money every eight years compared to the S&P 500's 16 years.

• double your risk and inflation-adjusted wealth twice as fast as the market

What does that potentially mean for your dreams of a comfortable or even rich retirement?

Inflation-Adjusted Consensus Total Return Potential: $1,000 Initial Investment

(Source: DK Research Terminal, FactSet)

Over the last 13 years, these blue-chips delivered 7X inflation-adjusted returns and analysts think that over the next decade they could 4X and potentially 8X over the next 15 years.

(Source: DK Research Terminal, FactSet)

Growing so much faster than either the aristocrats or S&P 500 means the ability to potentially generate massively more inflation-adjusted income and wealth.

OK, this is some very exciting math, but what evidence is there that these fast-growing high-yield blue-chips can actually deliver anything like 17% long-term returns over time?

Historical Returns Since September 2009 (Annual Rebalancing)

"The future doesn't repeat, but it often rhymes." - Mark Twain

Past performance is no guarantee of future results, but studies show that blue-chips with relatively stable fundamentals over time offer predictable returns based on yield, growth, and valuation mean reversion.

So how did these high-yield blue-chips do over the last 13 years, when 90% of returns were the result of fundamentals and not luck?

Even with several of these blue-chips suffering through multi-year bear markets, diversifying into all of them and annual rebalancing still managed to deliver market and even Nasdaq beating 19% annual returns.

7X inflation-adjusted returns that doubled that of the S&P 500, in one of the greatest tech-led bull markets in history.

Do you know how many high-yield/value portfolios managed to even keep up with the S&P 500 in the last decade? Almost none. This one doubled the returns of the S&P 500 and even slightly beat the Nasdaq.

Just like analysts expect in the future.

Average annual returns higher than the Nasdaq and with OKE, VFC, and MFC in multi-year bear markets. This is why diversification is the "only free lunch on Wall Street".

And what about income growth?

(Source: Portfolio Visualizer Premium)

The S&P and Nasdaq delivered impressive dividend growth in the bull market of the last decade.

But these high-yield blue-chips delivered 2X faster income growth than the Nasdaq and almost 3X faster growth than the S&P 500. Precisely because the winners were rebalanced into the bear market losers at very high yields.

A 2.7% yield in 2010 became a 41% yield on cost in 2021, turning these fast-growing high-yield blue-chips into a river of safe and rapidly growing income.

This Is Why You Should Combine Yield With Growth

The simple fact is that high-yield blue-chips + fast-growing blue-chips = potentially maximum safe income over time.

And why I always buy yield and growth in equal amounts.

What about future income growth?

(Source: DK Research Terminal, FactSet)

Analysts expect an incredible 26% annual dividend growth from these blue-chips in the future. Adjust for the probability of these companies not growing as expected, inflation, and taxes and you get a real expected income growth of about 13%.

Now compare that to what they expect from the S&P 500.

(Sources: S&P, FactSet, Multpl.com)

What about a 60/40 retirement portfolio?

• 0.5% consensus inflation, risk, and tax-adjusted income growth.

In other words, these five fast-growing high-yield blue-chips offer:

• About 3X the market's yield (and a much safer yield at that)
• About 6.5X its long-term inflation-adjusted consensus income growth potential
• 26X better long-term inflation-adjusted income growth than a 60/40 retirement portfolio

This is the power of fast-growing high-yield blue-chip bargain hunting in this bear market.

Bottom Line: 5 Fast-Growing High-Yield Blue-Chip Bargains You Don't Want To Miss

Bear markets can be scary, especially if you are a new investor who doesn't know that stocks don't only go up. Heck, this bear market has been plenty frightening for even veteran investors who are well aware of that fact.

"Fortunes are made in bear markets." - Todd Sullivan

"Fortunes are made by buying right and holding on." - Tom Phelps

But the simple fact is that this is exactly the time that smart long-term income growth investors can maximize their safe retirement income and lock in Buffett-like returns from blue-chip bargains hiding in plain sight.

Today, VFC, CMI, OKE, AVGO, and MFC offer a fantastic combination of safety, quality, growth, yield, value, and long-term return potential.

• a very safe 4.8% yield (about 1.4% average risk of a cut in a severe recession)
• BBB+ stable average credit rating (4.5% average 30-year bankruptcy risk)
• 75th industry percentile risk management (better than the dividend aristocrats)
• 28% undervalued (10.5X earnings)
• 38% average 12-month analyst consensus total return forecast
• 45% fundamentally justified average 12-month total return potential
• 12.7% long-term growth
• 17.5% long-term consensus return potential vs historical 19% returns

Do you want very high safe yield today? Who doesn't?

How about 12.7% long-term growth as well and 17.5% long-term, return potential? Yes, please I'll have some of that.

How about the ability to enjoy real risk, inflation, and tax-adjusted expected income growth of 13% annually for potentially years or even decades to come?

• 6.5X more than the S&P 500 and 26X more than a 60/40

This is what these five fast-growing high-yield blue-chips offer today, not despite this bear market, but precisely because of it.

You can't get deals this good when the market is at all-time highs, but only when investor sentiment is near record lows.

Recently, investor sentiment, as measured by Bank of America, hit zero, matching the Great Recession and Pandemic lows.

If you want to invest like Buffett (and who doesn't?), you need to be greedy when others are fearful. And you need to focus on safety and quality first, and prudent valuation, and sound risk management always.

"It's better to buy a wonderful company at a fair price, than a fair company at a wonderful price." - Warren Buffett

Well, here we have five high-yield blue-chips that are wonderful companies (better quality and safety than the aristocrats) trading at wonderful prices.

• literally Great Recession level valuations with a P/E of 10.5

And that's why you can take charge of your financial destiny and make your own luck on Wall Street.

"Luck is what happens when preparation meets opportunity." - Seneca the Younger

If you want to retire in safety and splendor, it doesn't take winning the lottery, it just takes the world's best blue-chips that combine safety, quality, yield, growth, and value.

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