British blue chips offer investors reliable income and growth

We aim to build resilient UK equity portfolios that offer both sustainable income and attractive total returns. Our team employs a disciplined, bottom-up approach to stock selection. We focus exclusively on high-quality, well-capitalised UK-listed companies, favouring those with robust balance sheets, strong cash generation and a proven record of reliable dividend payments. Our process is underpinned by considerations including macroeconomic trends.

We construct diversified portfolios of 40 to 60 holdings, aiming for low volatility through an emphasis on large-cap, quality businesses. By maintaining a repeatable, valuation-driven discipline, we strive to avoid value traps and ensure our investors benefit from both sustainable income and capital growth potential. The three stocks below illustrate our commitment to investing in firms that combine financial strength, strategic focus and appealing returns for shareholders.

Three UK blue chips stocks to consider

One of our key holdings is National Grid (LSE: NG), a critical infrastructure provider central to Britain’s energy transition. The company is embarking on a substantial investment programme, with plans to spend £60 billion over the next five years. This capital deployment is aimed at scaling up capacity to meet growing demand for electricity driven by the electrification of transport, heating and industry.

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National Grid’s investments also underpin the UK’s shift towards renewable energy, reinforcing its pivotal role in a low-carbon future. With a regulated asset base, long-term earnings visibility and inflation-linked revenues, National Grid offers resilient financial returns and defensive characteristics, making it a core holding for income-focused investors.

Another core position is Unilever (LSE: ULVR), a global leader in the consumer-staples sector. Unilever’s portfolio includes many of the world’s most trusted household brands, ensuring steady demand even in challenging economic environments. The firm’s commitment to innovation and premiumisation has helped it sustain pricing power and foster loyalty from consumers.

Unilever continues to deliver consistent sales growth and improving margins while rewarding shareholders through progressive dividends. In times of market uncertainty, we find Unilever’s defensive qualities and cash generation particularly appealing.

A third significant holding is British American Tobacco (LSE: BATS). Our overweight position in the tobacco sector benefits from high dividend yields; however, our investment thesis for BATS is based on more than just its high yield. The company is actively repositioning itself for the future, investing in next-generation products such as vapour and oral nicotine, which are gaining traction with consumers worldwide.

At current levels, BATS trades at an attractive valuation relative to its earnings and cash-flow potential. In our view, this combination of capital growth prospects, income generation, and strategic repositioning makes BATS a compelling opportunity. While tobacco remains a controversial sector, we believe that the risk/reward profile for BATS is particularly favourable given its financial strength and ongoing transformation.

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