Investing in major, blue-chip companies can lack some of the sizzle and excitement of making a major buy of shares in a small or micro cap company. With a much lower ceiling and moves in share price that are typically mitigated by massive market forces, the potential returns and losses are much lower for blue chips.
A company like Procter & Gamble (PG) is a massive conglomerate with thousands of brands in thousands of markets. While small cap companies can offer the chance of double digit gains in a single day, Procter & Gamble gained a total of just under 8 percent over the last year. Over the last five years? It’s up just under 6 percent. Even stretching it to 10 years to smooth out the effects of the economic crisis, Procter & Gamble is up just under 53 percent. That’s an average return of 5.3 percent per annum.
However, when looking at blue chip companies as investment opportunities, it’s best to remember the old fable of the Tortoise and the Hare. While small caps might offer opportunities for major short-term gains, they also carry a great deal more risk with them. More often than not, the fact that mega cap companies have reached the levels of market cap that they have is a sign that their steady growth has outdone the rapid advances (and oft just as rapid retreats) of smaller cap companies over the years. What’s more, with most companies of this size, a dividend is offered which provides steady returns in good times and bad.
So, here are some mega cap companies that, between steady returns in share price and dividends, offer attractive investments even if their ceiling isn’t as high as that sexy small cap biotech company. Each of these companies has a market cap exceeding $150 billion, grew at least 8 percent over the last year, and has a dividend yield exceeding 2.5 percent. While past performance can never be a completely reliable indicator of future returns, the size and stability of these companies makes them relatively risk-free investments with a solid chance at continuing returns.
Market Cap: $183.73 billion Growth in Share Price over Last Year: 11.1 percent Dividend Yield: 5.7 percent
AT&T, coming from the traditionally dividend rich telecom sector, offers a clear example of why dividends are so attractive. A return of 5.7 percent in one year isn’t exactly going to bring investors running. But if that’s an annual return that’s effectively guaranteed, and it’s relatively immune to market fluctuations, and it’s in addition to any movement in share prices, it’s an extremely attractive proposition. AT&T may be locked in a life-or-death battle to acquire new wireless spectrum, but the total return last year of 16.8 percent comes as a pretty solid gain for a company so large.
China Mobile Ltd. (CHL)
Market Cap: $209.88 billion Growth in Share Price over Last Year: 9.03 percent Dividend Yield: 3.87 percent
China Mobile is a wireless telecom company servicing 31 provinces in China. The company could be well-placed to take advantage of a growing market for wireless services in China as that country’s expanding middle class continues to modernize their lives. Over the last year, the company’s provided a total return of 12.9 percent.
Market Cap: $266.83 billion Growth in Share Price over Last Year: 22.53 percent Dividend Yield: 2.49 percent
If Microsoft can continue to post gains like it did in 2011 into the future, owning the stock would be a complete no brainer. While offering a smaller dividend than some others, it’s still enough to give Microsoft a 25.02 percent return over the last year.
Market Cap: $162.08 billion Growth in Share Price over Last Year: 9.36 percent Dividend Yield: 4.09 percent
This drug company saw solid gains last year and threw in a strong dividend to give shareholders a total return of 13.45 percent.
Market Cap: $203.43 billion Growth in Share Price over Last Year: 14.08 percent Dividend Yield: 2.69 percent
This retail giant has appeared largely immune to the market trends that are beginning to kill the bottom line for other Brick and Mortar stores. Between growth in share price and a dividend, Wal-Mart shareholders saw a total return of 16.77 percent.
While Apple (AAPL) didn’t qualify for this list because of its lack of a dividend, rumors abound that the company will soon be putting its massive cash reserves in action in the form of a dividend for its shareholders. Should this be the case, the tech giant that has risen to the top spot as the most valuable company in the world would become an even more attractive investment. While some might question the long-term prospects of a company selling luxury consumer goods, Apple has a return of over 48 percent over the last year and almost 525 percent over the last five years. The addition of a dividend might be just the thing to mitigate a slowdown in growth.