When the stock market corrects downward as it did in the recent late summer and early fall of 2011, that correction can be an excellent opportunity to pick up shares of blue chip stocks to be long term holdings in your retirement portfolio. These are the types of stocks which should provide excellent returns over the long haul and these market downturns or corrections can be view as an opportunity to buy these stocks on sale.
Intel Corp. (NASDAQ:INTC) is the first technology sector pick for this list. Intel now sports a market cap of over $100 billion, putting the stock in the mega-cap category. After seeing net income drop to under $1.00 per share in the recession year of 2009, the company bounced back to earn $2.05 in 2010 and is forecast to earn $2.45 for full year 2011. As a blue chip stock, Intel is pays an attractive and growing dividend. The current 21 cents quarterly payout is double the rate of five years ago. Intel is blue chip stock on sale when the share price gets at or near $20.
Johnson & Johnson (NYSE:JNJ) fills the need for a healthcare sector blue chip stock. With a market cap of $175 billion, Johnson & Johnson is one of the 10 largest companies in the U.S. This company was able to generate steady earnings per share growth right through the recent economic recession. As a Standard & Poor's dividend aristocrat stock, Johnson & Johnson has increased the dividend payout for at least 25 consecutive years. Over the last five years the quarterly distribution has been increased from 37.5 cents to the current 57 cents per share. JNJ share would be an attractive buy at $62 or less.
Pfizer Inc. (NYSE:PFE) is another blue chip healthcare stock, developing, manufacturing and distribution pharmaceuticals. Pfizer has a current market cap of $155 billion and a dividend yield of almost 4 percent. When the share price drops below $20 the yield climbs to over 4 percent, making PFE a very attractive long term pick up. Annual sales are not forecast to grow as rapidly as with Johnson & Johnson, but the trade off is a higher current dividend yield. Pfizer did cut the quarterly dividend in half after the 2009 first quarter, but the payout is again on the rise.
Technology company Cisco Systems (NASDAQ:CSCO) could be considered a newcomer to the label of blue chip stock. The company initiated the payment of regular quarterly dividends in 2011 and many consider the payment of a regular dividend to be a requirement for the blue chip designation. A major player in computer networking, Cisco has a current market cap of just under $100 billion. The 6 cents per share quarterly dividend gives CSCO a yield of just over one percent, compared to the 3 percent plus yields on the rest of this list. The upside is the possibility – now that the company has decided to pay dividends – of a pattern if significant future dividend increases.
Diversified manufacturing company General Electric (NYSE:GE) was forced to slash its quarterly dividend from 31 cents to 10 cents in mid 2009 when the company's financial arm felt the continued effects of the 2007 and 2008 financial crisis and the economic recession. The company was again able to start increasing the dividend in the second half of 2010 with a boost to 12 cents per share. The cash cushion at GE is ample, with a current ratio above 2.3. The dividend has been increased three additional times to the current 17 cents per share. At that level GE shares yield well over 4 percent. The $170 billion market cap General Electric is forecast to see earnings increase 14 percent to $1.56 per share in 2012, making it highly likely the payout will further increase. GE has dropped as low as $14 over the last year, but anything under $16 per share should be viewed as a buying opportunity.
The blue chip stocks discussed here make excellent retirement plan assets primarily due to the high probability of continued strong dividend yields and annual or more frequent dividend increases. In a tax qualified retirement plan, those dividends will build up over time to be reinvested during the accumulation phase of the plan and to provide a nice income when your retirement years roll around. Keep an eye on the annual share price charts for these stocks and when they drop below the 100 day moving average, plan to pick up more shares.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.