Just over a week into 2022, investors may be wondering if the fiery bull market can continue amid potentially higher interest rates and an ongoing pandemic.
Blue chip dividend stocks have the ability to outperform S&P500 over time through their ability to weather downturns and pay dividends regardless of the market cycle. Magna International (NYSE: MGA), Linde (NYSE:LIN)and caterpillar (NYSE: CAT) are three leading companies investors can rely on to help them achieve their financial goals. Here’s what makes each a great buy now.
The Semiconductor Shortage Won’t Last Forever
Lee Samaha (Magna International): It was another difficult year for the automotive sector. If it weren’t for the lingering impact of the COVID-19 pandemic on production facilities, it’s the well-documented global shortages of semiconductors that are curtailing production plans. As such, global light vehicle production in 2021 turned out to be below most expectations – growing just 1.2% from 2020 levels according to industry forecasters. IHS Markit.
That’s bad news for automakers, and it’s also bad news for auto parts and original equipment manufacturers (OEMs) like Magna International.
With sales of approximately $36 billion in 2021 and a product portfolio (body structures, power and vision, seats, complete vehicles), Magna is truly a top game on the automotive industry. So when the auto industry sneezes, Magna catches a cold. Indeed, during the recent third quarter, management was forced to revise downwards its assumptions for global light vehicle production for the full year and its own sales, from 38 to 39.5 billion to a new range of $35.4 billion to $36.4 billion.
That said, if investors can look past the short-term issues, the stock looks very attractive. For example, IHS Markit predicts that global light vehicle production will grow 9% year-over-year in 2022. Also, the shortage of semiconductors won’t last forever. Additionally, Magna is a company that generated over $2 billion in free cash flow (FCF) in the previous three years, and if it can get back to that in the next two years, it will trade at only 12 times FCF. on the current market capitalization.
A blue-chip noble stock can bolster your portfolio in the coming year
Scott Levine (Lindia): Investors reflecting on how their holdings will perform in 2021 are likely pretty pleased. With the S&P 500 rising 28% last year, investors are likely to find many tickers in their portfolios that have performed quite well. Of course, there is no guarantee that the market rise will continue; in fact, many experts are predicting that the market is on the verge of a sharp correction in 2022. If you are also bearish in 2022 or looking to bolster your portfolio with a solid blue chip stock, Linde deserves careful consideration. .
Supplying gases for industrial use, Linde serves a variety of different businesses. The company generates stable revenues in end markets such as healthcare, food and beverage, and semiconductor manufacturing. Additionally, it focuses on growth opportunities like the hydrogen market. During the company’s third-quarter earnings conference call, for example, Sanjiv Lamba, the company’s chief operating officer, said Linde has 260 hydrogen-related projects in its pipeline, worth around $4 billion. dollars of potential investments. However, potential investors may want a more concrete indication of the company’s prospects for the coming year. To that end, it’s worth noting that the company has a backlog of $13.4 billion, which management says “includes contract-guaranteed incremental growth with fixed payments.”
Without a doubt, any discussion detailing the merits of an investment in Linde must include management’s ongoing commitment to rewarding shareholders. For nearly 30 years, Linde has steadily increased its payouts to shareholders, earning it the title of dividend aristocrat. While the 1.2% forward yield won’t put the stock on a list of high-yielding dividend stocks, it may help provide some stability for investors looking for conservative stocks to bolster their wallets.
A reliable dividend supports this cyclical activity
Daniel Foelber (Crawler): In the first five trading days of 2022 alone, Caterpillar’s stock prices are up more than 8%, a gain that many investors are hoping for throughout the year. Caterpillar is known for its construction equipment, but its energy and transportation division is its largest segment. Caterpillar also has a large mining segment. All three industries are well set to soar in 2022 and beyond on strong infrastructure spending, high oil and gas prices and demand for raw materials.
Caterpillar is a cyclical company that has been on the verge of a multi-year bull cycle for some time now. The U.S.-China trade war, followed by the COVID-19 pandemic, threw wrenches into what could have been a boom time for Caterpillar. A strong residential housing market coupled with seven-year high oil and gas prices should make 2021 a strong year for Caterpillar once it reports fourth quarter and full year results January 28. Investors should tune in to see if Caterpillar’s financials live up to expectations, as well as a preview of the company’s guidance for 2022.
Caterpillar’s results can fluctuate, but the company has been able to consistently pay and increase its dividend for 28 years, making it a dividend aristocrat. Caterpillar’s reliable dividend, currently yielding 2%, provides an attractive income stream that investors can rely on in good times and bad.
Equal shares of Magna, Linde and Caterpillar provide an investor with exposure to several different sectors and an annual dividend yield of 1.8%.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.