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Top 5 Blue Chip Stocks To Watch For 2019

Dividend stocks are great options for retirees’ portfolios: The best ones offer the reliability of a quarterly payment coupled with the stability of a sound business model that can support — and hopefully grow — those payments. 

We asked three of our investors to scour the stock market and bring us back their recommendations for the best dividend stocks for retirees’ portfolios now. They came back with three companies from a diverse array of sectors.

Top 5 Blue Chip Stocks To Watch For 2019: The Goodyear Tire & Rubber Company(GT)

You’ve likely heard new-vehicle sales in the U.S. are currently plateauing, which makes it difficult to sell a near-term growth story for automakers. Nonetheless, the auto industry has trends that could provide strong growth for Goodyear despite the company’s being sold off with the rest of the industry — it currently trades at a paltry forward P/E of 6.6, per Morningstar estimates.

Total sales are plateauing, but the sales mix is wildly shifting in favor of larger vehicles such as SUVs, crossovers, and pickup trucks. That means more larger tires on the road, and that means better margins for Goodyear. In 2009, light trucks were 45% of the U.S. new vehicle market; that exploded in the years since to 68% during the first quarter of 2018. Further, LMC Automotive predicts light trucks will generate roughly 73% of the market as soon as 2022.

A sales mix in the Americas with such a large percentage of light trucks is one growth catalyst for Goodyear, but there’s a long-term catalyst as well: driverless vehicles. Consider that by 2030, 25% of global miles traveled will be shared, according to The Boston Consulting Group, and the autonomous market will be a $7 trillion business by 2050, according to an Intel report. As the market shifts to fleet ownership, rather than individual consumers, Goodyear could leverage its physical-store tire services to sign partnerships with fleet owners, which could become a lucrative business.

Granted, the driverless-car future is an uncertain one, but one thing is certain: Tires, and other products associated with driverless cars, will become much more complex. That means growth — long-term growth — for Goodyear if it can leverage its distribution network, innovative tires, and service bays to carve out its place in the market.

Top 5 Blue Chip Stocks To Watch For 2019: Newmont Mining Corporation(NEM)

When we think about businesses that make Fortune’s most admired companies list, we usually don’t consider the mining industry. Yet Newmont Mining Corp (NYSE:NEM) impressively made the list this year. Only a handful of companies within the sector joined NEM in this rare honor.

The question, though, is whether it will matter to potential investors. While I doubt anyone’s going to buy NEM based on this distinction, it helps to draw attention to what management is doing right. For starters, company executives are optimistic about their chances in 2018, raising their gold production guidance.

Second, I appreciate that the optimism is translating to relative stability in the markets. NEM stock is up 4.6% YTD, and compared to its rivals, Newmont has held up well. Aside from some soft patches in February and March, NEM hasn’t given shareholders reason to panic.

With an improving gold sector, and a potential seasonality boost, I’m confident that Newmont will at least meet expectations. Ideally, I’d like to see a little bit more discipline in cost efficiencies, which would help return them to profitability. However, they’re growing their top line, and reducing their long-term liabilities.

Overall, I like what I’m seeing. NEM is easily one of the more intriguing gold stocks to buy!

Top 5 Blue Chip Stocks To Watch For 2019: Taiwan Semiconductor Manufacturing Company Ltd.(TSM)

Another burgeoning cryptocurrency mining stock that isn’t exactly keen on divulging the percentage of its sales tied to mining is Taiwan Semiconductor Manufacturing Company(NYSE:TSM). Last week, TSMC reported strong first-quarter operating results that included a 6% increase in sales from the prior-year period, as well as its single-best sales month in history in March ($3.5 billion). C.C. Wei, TSMC’s president and co-CEO, specifically said that "these results were mainly driven by strong demand from high performance computing such as cryptocurrency mining." 

In addition, Coindesk notes that Chinese mining hardware maker Bitmain, a client of TSMC, unveiled its next-generation, ASIC (application-specific integrated circuit)-based, Ethereum mining equipment called Antminer E3 in early April. The unit, which has a list price of $800, is set to ship in July. Bitmain’s need for ASIC chips to satisfy demand for Antminer E3 may very well be the reason TSMC experienced a surge in sales during March and in Q1 as a whole. 

However, the downdraft in bitcoin and other crypto token prices in 2018 has certainly cast a shadow on industry demand moving forward. Having previously forecast sales growth of 10% to 15% in 2018, TSMC also lowered its sales growth expectations to 10% for the current year on uncertainty in the crypto mining space. Like NVIDIA and AMD, TSMC’s share price may be adversely impacted if cryptocurrency prices continue to sink. 

Top 5 Blue Chip Stocks To Watch For 2019: Activision Blizzard, Inc(ATVI)

With eight $1 billion-plus franchises in its enviable portfolio — think wildly popular titles like Call of Duty, Overwatch, Destiny, and World of Warcraft — it’s no mystery that Activision Blizzard is a leader in the burgeoning video game space. Activision also enjoys a commanding lead in the mobile gaming market through its $5.9 billion acquisition of Candy Crush-maker King Digital in late 2015.

And it doesn’t just make money from the initial sale of its games. Many of its titles enjoy a fervent base of paying monthly subscribers, and in-game content sales exceeded $1 billion last quarteralone. That’s not to mention the promise of management’s plans to implement more in-game advertising to generate incremental revenue.

A female gamer and her team participate in an esports tournament.

IMAGE SOURCE: GETTY IMAGES.

What’s more, with the launch of its new Overwatch League earlier this year, Activision is poised to benefit from the unstoppable rise of esports. According to SuperData Research, the esports market is expected to attract nearly 300 million unique viewers this year, and should exceed $2 billion in revenue by 2021.

With the stock trading around 15% below its 52-week high amid a broader pullback in tech stocks in recent weeks, I think now is a great time to open or add to a position in Activision Blizzard.

Top 5 Blue Chip Stocks To Watch For 2019: Pattern Energy Group Inc.(PEGI)

With a 9.3% yield at recent prices following the 31% decline in its stock price over the past year, independent renewable-energy producer Pattern Energy looks like a yield trap on the surface. And it seems blatantly obvious why investors have sold out of the stock recently, when you consider two factors. First, changes to tax equity investing rules in the U.S. have already started to hurt funding for new projects; second, rising interest rates could affect Pattern Energy’s access to capital. 

But my analysis leads me to a very different conclusion: Now is an excellent time to buy Pattern, and I think the company is going to be able to maintain its payout in the near term, and start increasing it again within a few years.

Pattern generates sufficient cash flow — measured as cash available for distribution (CADF) — to maintain its dividend. And it operates in Canada, Japan, and South America, as well as the U.S., dampening the impact of tax law changes.

Furthermore, CEO Mike Garland said Pattern "… is in an excellent position to make further acquisitions without raising any common equity, allowing us to grow our CAFD per share." With other sources of capital at its disposal, this alleviates one of the risks that would have led to a dividend cut: selling shares of its own stock. 

Don’t get me wrong. This isn’t a zero-risk investment, and it shouldn’t be counted on for income you can’t live without. But if you can stomach a small amount of risk that the payout might be cut, the opportunity to capture a very high yield is worth it, in my book. Add in the long-term growth prospects as renewable energy takes more share from fossil fuels, and Pattern is an excellent investment for retirement savers. 

Top 5 Tech Stocks For 2018

Lately, on Industry Focus: Tech, we’ve focused on the megacap businesses that have been dominating the news — at the cost of shedding some light on smaller companies with massive growth potential. In this week’s episode, host Dylan Lewis talks with Fool.com contributor Brian Feroldi about following ultra-compelling small-cap tech companies.

Tune in to find out how each business works, how companies like AppFolio thrive in markets that are too small for the big guys, the biggest risks investors should know before taking a closer look at these companies, which particular one is the most exciting story today, and more.

Top 5 Tech Stocks For 2018: The Goodyear Tire & Rubber Company(GT)

You’ve likely heard new-vehicle sales in the U.S. are currently plateauing, which makes it difficult to sell a near-term growth story for automakers. Nonetheless, the auto industry has trends that could provide strong growth for Goodyear despite the company’s being sold off with the rest of the industry — it currently trades at a paltry forward P/E of 6.6, per Morningstar estimates.

Total sales are plateauing, but the sales mix is wildly shifting in favor of larger vehicles such as SUVs, crossovers, and pickup trucks. That means more larger tires on the road, and that means better margins for Goodyear. In 2009, light trucks were 45% of the U.S. new vehicle market; that exploded in the years since to 68% during the first quarter of 2018. Further, LMC Automotive predicts light trucks will generate roughly 73% of the market as soon as 2022.

A sales mix in the Americas with such a large percentage of light trucks is one growth catalyst for Goodyear, but there’s a long-term catalyst as well: driverless vehicles. Consider that by 2030, 25% of global miles traveled will be shared, according to The Boston Consulting Group, and the autonomous market will be a $7 trillion business by 2050, according to an Intel report. As the market shifts to fleet ownership, rather than individual consumers, Goodyear could leverage its physical-store tire services to sign partnerships with fleet owners, which could become a lucrative business.

Granted, the driverless-car future is an uncertain one, but one thing is certain: Tires, and other products associated with driverless cars, will become much more complex. That means growth — long-term growth — for Goodyear if it can leverage its distribution network, innovative tires, and service bays to carve out its place in the market.

Top 5 Tech Stocks For 2018: Amphenol Corporation(APH)

Aphria (TSE: APH) is an early leader in Canada’s high-growth cannabis industry. With a market cap of $2.4 billion, Aphria is the second-largest cannabis company in Canada behind Canopy Growth Corp’s (TSE: WEED) $6.6 billion.

 

Shares of Aphria are traded on the Toronto Stock Exchange under the ticker symbol APH. Shares are also traded on US, OTC (over-the-counter) markets under the ticker symbol APHQF.

If there is one stock to own to profit from the cannabis revolution, Aphria is the choice. Let me explain…

Aphria Is Benefitting From A Legal Monopoly
Aphria won the cannabis lottery back in 2014 when it received an exclusive permit to grow and sell cannabis from Health Canada, the regulatory agency responsible for issuing permits.

At last count, more than 1,000 companies have applied for a license. But as it stands, Health Canada has only issued 93 permits — and Aphria is one of the lucky recipients.

This exclusive permit gives Aphria two powerful and sustainable competitive advantages. First, it gives Aphria a huge head start on the competition. Second, it will protect Aphria from new competition. 

Health Canada will issue more permits in the next few years. But it is deliberately restricting the number of permits to encourage young cannabis companies’ profitability, as this will help to remove illegal cartels from the cannabis trade.

Aphria Is Constructing A 1 Million Square Foot Greenhouse
After securing its exclusive permit, Aphria quickly turned its attention to building one of the largest cannabis greenhouses in the world. The company’s 1 million square foot, state-of-the-art cannabis greenhouse will be one of the largest in the world when completed.

The new facility will include:
 
— 700,000 square feet of Dutch-style greenhouses.
— 230,000 square feet of infrastructure, including new level 9 vaults.
— Automation of the greenhouses, processing areas, and warehouse facilities.
— Annual production capacity of over 150,000 lbs of cannabis.

This new greenhouse positions Aphria to be the number one low-cost provider of cannabis in Canada — and eventually the world as it continues expanding into international markets.

The final phase of the project is projected to be completed this summer.

Top 5 Tech Stocks For 2018: Boeing Company (BA)

I was one of many in the business media writing about Boeing Co’s (NYSE:BA) stellar first-quarter earnings April 25. Boeing delivered adjusted earnings per share of $3.64, 41% higher than the consensus estimate. While we’re on the subject of beats, its free cash flow was $2.74 billion, 84% higher than analyst expectations.

“Well it’s not every day that a mega-cap company beats consensus by 40 percent,” Robert Stallard, an analyst with Vertical Research Partners said in a note to clients. “The wall of cash that the company is generating makes it hard to be absent from the stock.”

Indeed.

Based on an enterprise value of $196.4 billion and a trailing 12-month free cash flow of $12.6 billion, Boeing has an FCF yield of 6.4%, a perfectly decent yield for a company that’s firing on all cylinders at the moment. Here’s what I had to say about Boeing in April a couple of weeks before earnings:

“Now that I’m back on Boeing wagon, I do believe that Boeing stock could deliver 20%-25% compound annual growth over the next five years,” I wrote April 10. “If it does, a $1,000 stock price is not out of the realm of possibility.”

After its strong first quarter, I have no doubt it’s possible by 2023.

Top 5 Tech Stocks For 2018: Phillips 66(PSX)

Phillips 66 (NYSE:PSX) is a welcome breath of fresh air in the energy space. That’s because while many energy stocks were slowing dividend growth down to a trickle during the oil-price collapse starting in summer 2014 – or even cutting payouts – Phillips 66 has kept the income pipeline flowing.

Namely, since 2014, this refiner and midstream company has juiced its dividend by nearly 80%, including a substantial 11% hike last year.

PSX should have plenty of ammunition for another dividend increase come early May, when it typically makes an announcement. That’s because the company reported yet another excellent quarter a couple months ago that beat the pants off analyst estimates – profits of $1.07 per share were well ahead of the consensus estimate of 86 cents.

But the spending won’t end there. Phillips 66 also plans to spend $500 million more on capital expenditures in 2018 than it did in 2017, which should fuel growth over the coming years.

Top 5 Tech Stocks For 2018: Brookfield Renewable Powerr Fund(BEP)

When investors are looking at the energy industry today, there’s a lot to consider. Volatile oil prices can make big oil stocks risky, changing utility markets have hurt formerly safe utility companies, and even natural gas isn’t the profitable business it once was. But renewable-energy production around the world is growing, and companies that own renewable assets can generate consistent cash flows capable of funding dividend growth for years to come.

 

One of the best dividends for in-the-know investors is Brookfield Renewable Partners, a yieldco that owns 16,000 megawatts of generating capacity around the world. Eighty percent of that capacity is hydropower, but the company is adding more wind and solar assets after acquiring a 31% interest in TerraForm Global and a 16% interest in TerraForm Power (NASDAQ:TERP).

 

What’s unique about Brookfield Renewable Partners is that it’s not as tied to the idea of issuing stock to fund acquisitions as many yieldcos have been in the past. Instead, it expects to grow its dividend 5% to 9% annually and use any excess cash from the business to grow cash flow organically. If you look at the dividend over the past decade, you can see that the strategy has resulted in steady growth:

Energy markets can be volatile, but a renewable-energy company like Brookfield Renewable Partners usually buys projects backed with long-term contracts to sell energy to utilities under a set rate. Yieldcos that can do that well will be big winners for investors, and that’s why Brookfield Renewable Partners is a great dividend stock today.