Why the Bluest Blue Chips Rule This Market

Large, dividend-paying stocks were among the best performers in 2011, and analysts and money managers say they are positioned for another strong showing this year. The 10 highest-yielding stocks in the Dow Jones industrial average as of Jan. 1, 2011—the so-called Dogs of the Dow—returned 17.2 percent, dividends included, over the course of the year, 15 percentage points better than the broad market’s total return.

This year, concerns over Europe’s debt crisis and related global market volatility will have more investors turning to blue-chip dividend stocks for their relative safety, says Matthew D. McCormick, a principal at Cincinnati-based money manager Bahl & Gaynor Investment Counsel. Investors are “unlikely to take an undue amount of risk,” he says. “If they’re going to be in stocks, their thinking will be the bigger, the bluer, the better—and why not get paid for it?”