Blue-chip stocks are defined as large, stable, and well-known companies. In most cases, these companies have been around for many years and have stable revenue and profitability. Most of them also tend to return cash to investors through dividends and share buybacks. So, let us look at some of the best under-the-radar blue-chip stocks to invest in for retirement.
FactSet Data Systems (FDS)
FactSet is a leading financial services company that offers its services to businesses in the financial sector. The firm operates in four key segments like research, analytics, and trading, CTS, and wealth. Its clients include both buy-side and sell-side financial professionals and even governments. FactSet competes with companies like Bloomberg, Refinitiv, and S&P Global.
Over the years, FactSet has made substantial growth. Its revenue had jumped from $1.1 billion in 2016 to more than $1.494 billion in 2020. Its annual profit has jumped to over $372 million.
FactSet is a good blue-chip stock to invest in for several reasons. First, the firm has steady revenue and free cash flow. Second, it has some of the most reliable clients like Goldman Sachs and Morgan Stanley, meaning that churn is usually limited. Third, the firm has a steady balance sheet with just $800 million in debt. Additionally, it has a solid dividend yield and a lower payout ratio.
Moody’s (MCO)
Moody’s Corporation is a blue-chip company valued at over $70 billion. It generates more than $5.7 billion in annual revenue and a net income of around $1.7 billion. The company mostly competes with S&P Global and Fitch.
Moody’s is best known for its rating business. This is a business where the company does analysis on companies and governments and then assigns a rating on their health. As a result, it enables bond and stocks investors to make informed decisions when investing in these entities.
Moody’s operates in two segments. Moody’s Investors Service provides independent credit ratings to governments and investors, while Moody’s Analytics provides data and analytics solutions. The analytics business accounts for about 62% of its business.
This is a good company to invest in for several reasons. First, the firm has a long track record of growth, considering that it has been around for more than 100 years. Second, the firm has a strong moat in its business, taking into account that it only competes with two other major companies.
Third, its services are needed at all times since companies and governments are always raising cash. Finally, it has a strong dividend history. It has a dividend yield of about 0.6% and a payout ratio of 20.92%.
CME Group (CME)
CME Group is another blue-chip company that many people don’t know about. Yet, it is one of the most important companies in the financial world.
CME Group operates exchanges that enable investors to trade in assets like forex, agricultural commodities, interest rates, and indices, among others.
Its business also includes clearinghouses, which are essential services in trading. The company’s structure is divided into its derivatives exchange service, clearing business, cash market business, and market data. It owns brands like COMEX, NYMEX, and CBOT.
CME Group has a market capitalization of more than $74 billion. Over the years, its total revenue has surged from about $3.4 billion in 2016 to over $4.42 billion. Most of this growth has been organic and through acquisitions. Its net income has risen to more than $2 billion.
CME Group is a good blue-chip stock to invest in. For one, it faces minimal competition in its business model. Besides, it has already acquired most of its key competing companies. Second, the company has a stable business model that is rarely disrupted. Third, CME Group is always keen to return cash to investors through dividends and buybacks.
Boston Beer (SAM)
Boston Beer is a beer-making company that focuses on the high-end market. The firm has also made its name as one of the leading craft brewers in the US. The firm sells more than 7 million barrels of its products every year. Some of its key brands are firms like Samuel Adams, Dogfish Head, and Angry Orchard. It competes mostly with Molson Coors and AB InBev.
While beer consumption in the US has been falling, Boston Beer’s revenue has jumped from less than $906 million five years ago to over $1.7 billion. Its profitability is also strong, with a net income of around $238 million.
Boston Beer is a good blue-chip stock to invest in because of its strong brands and loyalty among its customers. It has also been growing its dividends in the past few years, making it a good stock for retirees. Finally, it is deeply involved in the fast-growing seltzer industry.
Autodesk (ADSK)
Autodesk is another company that many people don’t know about. It is a software company valued at more than $73 billion. The firm’s key products are used by design enthusiasts, engineers, and architects around the world. Some of its key products are AutoCAD, Revit, Civil 3D, and Fusion 360.
Like other software companies, Autodesk has transitioned itself from being a seller of software DVDs to a software-as-a-service (SAAS) company. Today, it sells most of its products using a subscription model. For example, AutoCAD goes for $1,777 per year or $220 per month.
The Autodesk business has grown over the years. Its revenue has almost doubled in the past five years to the current $3.5 billion. It has also moved from loss-making to generating more than $1.2 billion in profits.
Autodesk is a good blue-chip stock to invest in because of its strong moat in the architecture and engineering businesses. In fact, while the firm faces substantial competition from cheaper products, it remains to be a market leader.
Summary
We have looked at some of the best blue-chip stocks to invest in for your retirement. We believe that these companies are known for their strong moats in their businesses. They also have catalysts that will see their shares keep growing in the long term.
