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ASX Shares: Buying Blue Chip Stocks for Income

Caroline Mark

I love watching the share prices on the six stocks in my ASX Share portfolio.  I have two ASX blue chip stocks Alumina (AWC) and NAB (obviously NAB). I didn't realise how much the share prices on these big giants would move. 

I chose these two Blue Chip ASX Shares to buy late last year because they were big established businesses that paid dividends. Focussing on the dividends these ASX shares pay really helps me look through the share price gyration to what the company is actually doing.

My NAB Shares and getting my average price down
I first bought NAB back in September last year for $28.86 a share. The share price consequently dropped and I bougth 100 more shares on 2 December at $25.95 before, yes, you guessed it the price dropped further and I bought 100 more just before Christmas on 20 Dec at $24.88. At the time I kicked myself for buying more on 2 December.
 

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I've learnt to watch the share price and to show a modicum of patience because it really is amazing how much the share price moves within a day or over a few days. I watched it go down and then come up again so I thought there was momentum moving up in early December but obviously not. But my strategy to buy more has brought my average price down to $26.71. NAB's share price dropped in January 2020 to about $24.something and if I'd had more money I probably would have bought another 100 shares at that price. Today the share price is $26.03 so although I'm down 2.5% on my NAB Shares it's been a successful strategy.

Of course, it only works if the share price goes down, but now I own 300 NAB shares, with a dividend yield of 6.4%. I received my first dividend last year which felt great. 

I had bought my NAB ASX shares near the top of it's price range so I really wanted to average down my average price. Now that I've done that I'm keen to focus on the dividends it pays in November and May each year. I'm planning to re-invest the income I make from these dividends back into shares rather than to spend them.

ASX Share AWC has also dropped slightly but should I buy more of these ASX Shares?
AWC is a massive company, it's not going to fold, it has a strong capital structure and it really gives me a piece of the world economy. It was up, it's now slighly down on where I bought it at $2.24. The question is I only own 1,111 shares ( it was the first ASX share I bought and I bought to a value amount not a clean round number of shares hence the weird number I own), should I buy more of these Blue Chip ASX Shares?

It's a big commodity play, it's production and costs are predictable, what is not is the global economy! The coronovirus is clearly going to impact it's share price but the certainty of the US/China trade deal should be good for it's share price. 

What I'm going to do it wait until after reporting season because I want to know what the company has to say about it's outlook and about DIVIDENDS as that was a major reason why I bought it in the first place. Because I love dividends and they are the reason why Australian investors are addicted to ASX Blue Chip shares: they want income.

What is Reporting Season? And Why does it matter?
All the analysts go crazy for reporting season. Why? Well firstly they are working big hours to analyse all the company results so quite frankly they hate it! But it also means all the ASX listed companies have to report to the stock market and tell them how they are actually going! No fibs, no spin, the actual hard numbers. Clearly analysts love it! Especially for small caps because information can be hard to get and the get to see what is going on. ASX share investors then get a clearer picture of the ASX stock, the health of the underlying business and their future prospects. What is interesting is how important reporting season is for ASX Blue Chip Shares too. Now that I'm an active investor I'm genuinely interested to learn about AWX and the dividends management are planning on paying.

AWC: Do I buy more ASX Shares or what do I do next?
As I said I want to know about the Dividends - clearly I'm going to wait for Under the Radar Report's expert analysis - and then make an informed decision from there.

It's my first reporting season as an active investor. I know that lots of ASX share buying opportunities appear in the reporting season so I'm going to hold my fire power (ie save my money and wait!) and look to late Feb/ March to buy more ASX Shares!
 

 

About the Author

Caroline Mark

Caroline Mark is the Founder and Publisher at Under the Radar Report, which provides independent ASX share research to help build investor’s share portfolio. Under the Radar Report is licensed to give general share financial advice only (ASFL: 409518). The author is not licensed to give personal financial advice and this commentary is for general information only.

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