The 10 Best Blue Chips For Q4 2011
0.30%December 31 | MyPlanIQ portfolio symbol P_35354

We continue to investigate equities that are being recommended to us in the light of the turbulent times we are facing. Rex Moore picks up Jeremy Siegel's book, The Future for Investors, which focuses on his all-important "basic principle of investor return": "The long-term return on a stock depends not on the actual growth of its earnings, but on the difference between its actual earnings growth and the growth that investors expected."

Building on this, Rex set up a filter  went in search of companies today that have a reasonable chance of exceeding expectations over the next decade and screened based on the consistency, valuation, and dividend growth Siegel highlighted. Specifically, these companies:

• Beat EPS estimates for fiscal 2010 (and 2011, if reported). This is as far back as my screening data goes.
• Have an annualized EPS growth rate of at least 5% over the last 10 years.
• Exhibited growth in dividends per share of at least 5% over the last five years.
• Show signs that payout growth can continue, with a payout ratio less than 60% of earnings.
• Have manageable debt, with a debt-to-capital ratio below 60%.
• Have a current P/E below 27 (the current S&P 500 average is 14).

In addition, he required an ROE of 15% or better over the past three years. To show you how tough this requirement is, it cut the list of passing companies down from 162 to 44.

His highlighed 10 names that passed the screen, sorted by dividend yield:

Source: S&P Capital IQ.

This is a well constructed filter that gives names in a diversified set of categories with significant heavyweights included