5 Rich-Retirement Blue-Chips To Buy During The Next Market Slide

Nov. 03, 2021 11:15 PM ETGOOG, MA, SBUX, V, ENB24 Comments25 Likes


  • The market roared higher 6% in October and is 27% overvalued, and likely to deliver virtually zero inflation and risk-adjusted returns over the next five years.
  • Fortunately, there are always combinations of blue-chips that can help you achieve your comfortable or even rich-retirement dreams.
  • ENB, GOOG, V, MA, and SBUX are my new rich-retirement blue-chip correction watchlist in case the market tumbles in the coming weeks.
  • Weighted 50/50 growth and yield, these five blue-chips offer a very safe 3.6% yield, 15.4% growth consensus, and 19.1% annual long-term return potential, 13.4% risk-adjusted.
  • That's more than 2x the S&P 500's yield and risk-adjusted returns. Over the next 75 years, this portfolio, even with a 10% annual withdrawal rate, is likely to deliver 6% higher inflation-adjusted annual retirement income.
  • This idea was discussed in more depth with members of my private investing community, The Dividend Kings. Learn More »
Money Pile $100 dollar bills

Kativ/E+ via Getty Images

What an October we just had!

The S&P soared 6%, and popular growth stocks like Tesla (TSLA) rocketed up as much as 44%... in a month.

Does this seem like a market that's a bit overenthusiastic to you? It is.

JPMorgan (JPM) estimates that the S&P 500 is now 27% historically overvalued and offering very tepid returns for the next five years.

S&P 500 2023 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

S&P 500 2026 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

Year Upside Potential By End of That Year Consensus CAGR Return Potential By End of That Year

Probability-Weighted Return (Annualized)

2021 -24.22% -79.44% -59.58%
2022 -16.53% -14.26% -10.70%
2023 -7.77% -3.65% -2.74%
2024 1.45% 0.45% 0.34%
2025 11.45% 2.63% 1.97%
2026 22.30% 3.97% 3.23%

(Source: DK S&P 500 Valuation And Total Return Tool)

Adjusted for inflation, the risk-expected returns of the S&P 500 are near zero for the next five years.

Aristocrats are expected to deliver about 2.3% yield + 8.9% growth -3.0% valuation drag = 8.2% CAGR returns over the next five years, about 5.7% CAGR risk-adjusted.

That's much better than the S&P but compared to the 12% CAGR they've delivered over the past decade? Well, it's far from exciting.

Does this mean a market correction is right around the corner? Absolutely not.

Time Frame (Years)

Total Returns Explained By Fundamentals/Valuations

1 Day 0.02%
1 month 0.4%
3 month 1.25%
6 months 2.5%
1 5%
2 16%
3 25%
4 33%
5 41%
6 49%
7 57%
8 66%
9 74%
10 82%
11+ 90% to 91%

(Sources: DK S&P 500 Valuation And Total Return Potential Tool, JPMorgan, Bank of America, Princeton, RIA)

  • over 12 months luck is 20x as powerful as fundamentals
  • over 11+ years fundamentals are 11x as powerful as luck

Over the short-term valuations have almost nothing to do with stock returns. It's luck, momentum, and "animal spirits" that drive returns over a period of weeks or months.

Over the long term, 91% of returns are pure fundamentals, and 80% are pure valuation mean reversion.

So what does this mean for stocks?

That we might get a 4% to 5% Santa rally in the final two months of the year.

Could fundamental risks derail the Santa rally? Absolutely. On December 3rd we face a government shutdown and the debt ceiling cliff.

The market might start to wobble within 2 to 3 weeks of that deadline, BUT Speaker Nancy Pelosi says the Democrats might put a debt ceiling increase into the reconciliation bill that might pass in early November.

If the government shutdown is averted soon after, then the markets will be mostly free to bask in historical end-of-the-year optimism. Wall Street might embrace the motto "Permettez les bonnes temps roulez!" (let the good times roll).

At some point, a valuation reckoning is coming. But whether it happens in the next 2 weeks, or 2 years, no one can tell.

So here's my personal top priority watchlist for the next market pullback or correction, whenever it finally arrives.

These are the new blue-chips that I'll be buying with both hands when fear returns to Wall Street and rich retirement blue-chip bargains are raining from the sky.

When it's raining gold, reach for a bucket, not a thimble." -Warren Buffett

Why It's Time For 5 New Blue-Chips For My Personal Correction Watchlist

I'm now fully invested and no longer using dollar-cost averaging.

That's because over 160 years of market data in three countries shows that 70% of the time being fully invested results in about 2% better returns over time.

Over my 50-year time horizon, those 2% better returns could equal 2.7x more money, literally tens of millions.

Now, that doesn't mean I don't have some cash (or cash equivalents). I was using 20% of my monthly savings for DCA. But now all my savings are focused on future market downturns, and that's where my personal correction watchlist comes in.

Why am I not just planning on buying more Amazon (AMZN) and British American (BTI)?

Simply because after my January 401(k) and Roth IRA purchases of Amazon, I'll have invested about $400,000 into Amazon across all my portfolios, and nearly $500,000 into BTI, PM, and MO.

In other words, as far as my total invested capital is concerned I'll be

  • 25% AMZN
  • 25% BTI
  • 33% tobacco

The Charlie Munger risk cap recommendations are 20% or less for Ultra SWAN quality blue-chips and 33% or less in any given sector.

In other words, I'm now slightly overweight and need to diversify by diluting down my AMZN, BTI, PM, and MO positions.

It was an epic three-year deep value campaign, that saw me buy nearly $900,000 of the world's best growth stock and tobacco giants at the best valuations in 10 and 20 years, respectively.

But now it's time for me to start diversifying because as Ben Carlson says "concentration makes you rich, and diversification keeps you rich."

My New Top Priority Blue-Chips For The Next Market Downturn

100% of all my investing is driven by the Zen Phoenix strategy.

  • Zen Phoenix: always buy growth with yield and yield with growth
  • always at fair value or better
  • and always focusing on safety and quality first and sound risk management always
  • balance in all things that matter (safety, quality, risk management, yield, growth, and value)
Company Ticker Yield Growth Consensus Long-Term Consensus Total Return Potential Weighting Weighted Yield Weighted Growth Weighted Total Return Potential Conservative Risk-Adjusted Expected Return
Altria MO 8.14% 4.5% 12.6% 0.00% 0.0% 0.0% 0.0% 8.85%
Amazon AMZN 0.00% 23.2% 23.2% 0.00% 0.0% 0.0% 0.0% 16.24%
British American BTI 8.51% 4.2% 12.7% 0.00% 0.0% 0.0% 0.0% 8.89%
Magellan Midstream Partners (K-1 Tax Form) MMP 8.38% 3.4% 11.8% 0.00% 0.0% 0.0% 0.0% 8.25%
Meta Platforms FB 0.00% 17.6% 17.6% 0.00% 0.0% 0.0% 0.0% 12.32%
Enbridge (CA Company) (ENB) 6.41% 8.4% 14.8% 50.00% 3.2% 4.2% 7.4% 10.37%
Philip Morris International PM 5.32% 11.8% 17.1% 0.00% 0.0% 0.0% 0.0% 11.98%
Alphabet (GOOG) 0.00% 21.9% 20.4% 12.50% 0.0% 2.6% 2.6% 14.28%
Visa (V) 0.70% 16.5% 17.2% 12.50% 0.1% 2.1% 2.2% 12.04%
Mastercard (MA) 0.52% 22.1% 22.6% 12.50% 0.1% 2.8% 2.8% 15.83%
Starbucks (SBUX) 1.79% 30.7% 32.5% 12.50% 0.2% 3.8% 4.1% 22.74%
Dividend Aristocrats NOBL 2.30% 8.9% 11.2% 0.00% 0.0% 0.0% 0.0% 7.84%
Nasdaq QQQ 0.68% 10.9% 11.6% 0.00% 0.0% 0.0% 0.0% 8.11%
S&P 500 VOO 1.40% 8.5% 9.9% 0.00% 0.0% 0.0% 0.0% 6.93%
60/40 BAGPX 1.70% 5.1% 6.8% 0.00% 0.0% 0.0% 0.0% 4.76%
US Bonds SCHZ 1.30% 0.0% 1.3% 0.00% 0.0% 0.0% 0.0% 0.91%
Cash VGSH 0.30% 0.0% 0.3% 0.00% 0.0% 0.0% 0.0% 0.21%
Bitcoin BTC 0.00% 60.0% 60.0% 0.00% 0.0% 0.0% 0.0% 42.00%
Ether ETH 0.00% 80.0% 80.0% 0.00% 0.0% 0.0% 0.0% 56.00%
BlockFi GUSD 9.00% 0.0% 9.0% 0.00% 0.0% 0.0% 0.0% 6.30%
Total 47.45% 196.2% 243.6% 100.00% 3.6% 15.4% 19.0% 13.30%

(Source: DK Portfolio Construction Tool)

Enbridge is now my highest priority high-yield blue-chips and the reasons why are explained in this article.

And here is why Alphabet is one of my favorite hyper-growth blue-chips to buy during a future market downturn.

And when you combine all five companies? Well, you get a combo that rich retirement dreams are made of.

Investment Strategy Yield LT Consensus Growth LT Consensus Total Return Potential

Long-Term Risk-Adjusted Expected Return

Safe Midstream 6.1% 6.2% 12.3% 8.6%
ENB, GOOG, V, MA, SBUX 3.6% 15.4% 19.0% 13.3%
Safe Midstream + Growth 3.3% 8.5% 11.8% 8.3%
REITs 3.0% 6.9% 9.9% 6.9%
Ultra SWAN Retirement Portfolio 2.9% 9.4% 12.3% 8.6%
High-Yield 2.8% 11.2% 14.0% 9.8%
Dividend Aristocrats 2.3% 8.9% 11.2% 7.9%
Value 2.1% 11.9% 14.0% 9.8%
REITs + Growth 1.8% 8.9% 10.6% 7.4%
60/40 Retirement Portfolio 1.7% 5.1% 6.8% 4.8%
High-Yield + Growth 1.7% 11.0% 12.7% 8.9%
S&P 500 1.4% 8.5% 9.9% 7.0%
Nasdaq (Growth) 0.7% 10.9% 11.6% 8.1%
Chinese Tech 0.3% 12.0% 12.3% 8.6%

(Sources: Morningstar, FactSet Research)

How does a very safe 3.6% yield that grows at 5% to 7% CAGR over time sound like? Given that Vanguard's high-yield ETF yields 2.7%, it sounds pretty good.

How does 15.4% CAGR consensus growth sound like? That's nearly 2x what analysts expect from the S&P 500 over time, and 50% more than they expect from the Nasdaq. The same Nasdaq that yields just 0.7%.

The aristocrats? They yield 2.3% and Enbridge is a global aristocrat with a 26-year dividend growth streak.

Higher yield than high-yield funds? Check.

Faster growth than the Nasdaq? Check.

The income dependability of the aristocrats? Check.

Risk-adjusted expected returns that are nearly 2x that of the S&P 500 and 70% higher than the aristocrats and Nasdaq? Check.

If you want a wonderful combination of generous, and very safe yield, outstanding growth, and potentially life-changing risk-adjusted expected returns, this group of five rich-retirement blue-chips could be just what your retirement portfolio needs.

5 Rich-Retirement Blue-Chip Fundamentals

Company Quality Score (Out Of 100) S&P Credit Rating 30-Year Bankruptcy Risk Yield Discount To Fair Value FactSet Long-Term Consensus Growth Rate

Consensus LT Total Return Potential

Enbridge 82% BBB+ 5.00% 6.4% 11.71% 8.4% 14.8%
Alphabet 84% AA+ 0.29% 0.0% -13.58% 21.9% 21.9%
Visa 88% AA- 0.55% 0.7% -6.19% 16.5% 17.2%
Mastercard 86% A+ 0.60% 0.52% -10.69% 22.10% 22.6%
Starbucks 56% BBB+ 5.00% 1.80% 1.76% 30.70% 32.5%
Average 79.20% A+ Stable 2.29% 1.88% -3.40% 19.92% 21.8%

(Source: Dividend Kings Research Terminal)

Note that SBUX will be updated in Tuesday's Daily Blue-Chip Deal Video. Its low-quality score was due to the effects of the pandemic which has now passed and it's likely to see its safety and quality scores rise significantly.

But as you can see this is a very high-quality group of blue-chips. Their average credit rating is A+ stable, higher than the A- average of the aristocrats. Their average 30-year bankruptcy risk is 2.9%.

The chances that all five go bankrupt in the next three decades? About 1 in 48,753,973.

Their yield, if equally weighted, is still nearly 3x that of the Nasdaq.

And their growth consensus of 20% is nearly 2x that of the Nasdaq.

The only reason not to run out and buy this mini-portfolio right away is that it's slightly overvalued.

Remember this is a correction watchlist, and GOOG, V, and MA are not far from becoming the ultimate Buffett-style "wonderful companies at fair value".

The 15.3% CAGR risk-adjusted expected returns these five blue-chips offer is what Cathie Wood at ARKK and private equity strive to achieve over time.

It could double your money every five years. But rather than buying speculative tech names, (like Tesla) or illiquid assets that can tie up your money for up to 15 years, these five rich-retirement blue-chips can deliver life-changing returns with far less risk and are 100% liquid whenever the market is open.

Think that achieving 19.1% CAGR return potential, or 13.4% risk-adjusted returns from these five is insane in today's market? Remember we'd only start buying each company with limits set at fair value and chase them down to their eventual bottom.

  • Alphabet fair value: $2,566.53, potential good buy price (10% margin of safety) $2,309.87
  • Visa fair value: $200.38, potential good buy price (5% margin of safety) $180.34
  • Mastercard fair value: $306.76, potential good buy price (5% margin of safety) $291.42
  • Starbucks fair value: $111.13, potential good buy price (20% margin of safety) $88.91
  • Enbridge fair value: $47.87, potential good buy price (5% margin of safety) $45.48

ENB is already a potentially good buy for anyone comfortable with its risk profile.

SBUX is a potentially reasonable buy, and the rest require some patience and a market downturn.

Might the market rally so hard that these three hyper-growth blue-chips soar far out of range? Sure. And then I'll select new growth blue-chips to target in the next downturn.

Remember it's always a market of stocks, not a stock market. Something wonderful is always on sale, and more so in every market pullback and correction.

5 Rich-Retirement Blue-Chip Total Returns Since 2009 (Annual Rebalancing, 10% Annual Withdrawals, $100,000 Initial Investment)

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 let's take a look at how a hypothetical portfolio made up of these five rich-retirement blue-chips would have performed using annual rebalancing and a 10.0% annual withdrawal rate.

William Bengen, the father of the 4% rule, says a 60/40 can now use a 5% withdrawal rate safely. Most analysts and advisors think it's closer to 1% to 3%.

But with a 13.4% CAGR risk-adjusted expected return, let's see whether we could fund a comfortable retirement off even a modest investment with twice the withdrawal of a 60/40.

(Source: Portfolio Visualizer)

Even with a 10% annual withdrawal, this portfolio more than doubled the S&P 500 and achieved 21.4% CAGR returns (without withdrawals). That's slightly better than what analysts expect in the future.

(Source: Portfolio Visualizer)

Even with $110,000 taken out in the form of retirement income, this portfolio, adjusted for inflation is now $259,000 in size, compared to $141,000 for the S&P 500.

And remember the market is NOT going to be able to sustain nearly 16% CAGR returns in the future.

(Source: Portfolio Visualizer)

Volatility for pure stock portfolios is naturally high, but these rich-retirement blue-chips tend to recover far faster than the market due to superior quality and fundamentals.

(Source: Portfolio Visualizer)

Thanks to being 50% ENB during the worst oil crash in human history, it took four extra months for this portfolio to recover record highs.

Another global lockdown that sends crude to -$38 is very unlikely.

(Source: Portfolio Visualizer)

Here are the rolling returns without the 10% annual withdrawals. Notice how these five consistently outperformed the market, even with ENB falling into two multi-year bear markets during this time.

75-Year Monte Carlo Simulation

Since 2009 we had a financial crisis and a pandemic. Two of the worst economic crises in 75 years. So unless the future brings even more severe economic and market smashing events, it's likely that the last 12 years provide sufficient statistically significant data to estimate what might happen with such a retirement portfolio over the very long term.

Effectively, simulating 5,000 75-year periods, a Monte Carlo simulation can give us an idea of what these five rich-retirement blue-chips are likely to do in any economic or market conditions. Heaven or hell, and everything in between.

(Source: Portfolio Visualizer)

There is an 80% statistical chance that these rich-retirement blue-chips can deliver between 14% and 20% inflation-adjusted returns in the coming decades.

That means a safe withdrawal rate of 12% to 17%, or 3x that of a 60/40 according to William Bengen, and 5x that of a 60/40 according to most financial advisors.

(Source: Portfolio Visualizer)

Imagine starting out with $100,000 and being able to withdraw $10,000 per year or $833 per month. Combined with the average of $1,634 social security benefit, that's $2,467 in monthly income or $4,101 per month for a married retired couple.

That's not a rich retirement, but it's manageable, and keep in mind we started out with $100,000.

Median Retirement Savings September 2021

(Source: Smart Asset)

The median retirement account is actually $120,000 for those approaching retirement age right now.

After 30 years, this portfolio is likely to be producing $57,000 per year in inflation-adjusted income.

  • $4,754 per month
  • $8,022 per month, in today's dollars, for a married retired couple
  • $96,264

That's not quite a rich retirement but it's a comfortable one and most importantly this portfolio's retirement income is likely to rise year after year, decade after decade.

No matter how long your retirement lasts, your standard of living, from even just a $100,000 nest egg, is likely to increase over time. How quickly? How does 6.0% annually, adjusted for inflation sound?

To me, that sounds like a rich-retirement dream portfolio.

This is how you solve the low-yield retirement crisis we're facing for the foreseeable future.

This is how you avoid having to work until you die (unless you want to work at a second career you enjoy).

This is how you take charge of your financial destiny and achieve a comfortable or even rich retirement of your dreams.

No matter what happens with the economy or stock market in the coming decades.


Dividend Kings helps you determine the best safe dividend stocks to buy via our Automated Investment Decision Tool, Research Terminal, Phoenix Watchlist, Company Screener, and Daily Blue-Chip Deal Videos.

Membership also includes

  • Access to our five model portfolios
  • Daily Phoenix Portfolio Buys
  • 50 exclusive articles per month
  • 50% discount to iREIT (our REIT focused sister service) 
  • real-time chatroom support
  • exclusive daily updates to all my retirement portfolio trades 
  • numerous valuable investing tools 

Click here for a two-week free trial so we can help you achieve better long-term total returns and your financial dreams.

This article was written by

Dividend Sensei profile picture
Maximize your income with the world’s highest-quality dividend investments

Adam Galas is a co-founder of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 5,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) The Intelligent REIT Investor (newsletter), (2) The Intelligent Dividend Investor (newsletter), (3) iREIT on Alpha (Seeking Alpha), and (4) The Dividend Kings (Seeking Alpha).

I'm a proud Army veteran and have seven years of experience as an analyst/investment writer for Dividend Kings, iREIT, The Intelligent Dividend Investor, The Motley Fool, Simply Safe Dividends, Seeking Alpha, and the Adam Mesh Trading Group. I'm proud to be one of the founders of The Dividend Kings, joining forces with Brad Thomas, Chuck Carnevale, and other leading income writers to offer the best premium service on Seeking Alpha's Market Place.

My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives.

With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and safe and dependable income streams in all economic and market conditions.


Disclosure: I/we have a beneficial long position in the shares of ENB, GOOG, V, MA, SBUX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: DK owns ENB, GOOG, V, MA, and SBUX in our portfolios.

Recommended For You

Comments (24)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.