A case for dividend paying blue chip stocks

The US blue chips are represented by the Dow Jones Industrial Average which consists of 30 stocks that are the leaders of their respective industry. Those large, dividend paying stocks were the best in 2011 returning 17.2 percent.

They provide safety in an otherwise volatile market. Europe with its debt crisis, somewhat unstable political situations and debt downgrades by rating agencies, investors are looking to less riskier blue chips.

They are well capitalized and rich in cash holdings. This provides an investment opportunity for investors who are looking to avoid or lessen risk exposure.

Dividends also a major factor in attracting investors to blue chips. The 10 highest yielding stocks in the Dow Jones Industrial Average returned 3.96 percent for 2011. Compare this to less than 2 percent yield for 10-yearTreasury bonds.

Investors in blue chips are getting strong earnings. The largest 50 companies of the US are trading at 10 times their expected earnings for 2012.

In 2008 and 2009 financial meltdowns, companies cut their pay outs. This can’t be continued indefinitely. Companies will increase payout rates and investors will get back to their investment strategies. Blue chips will thrive in years to come.