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Updated on March 8th, 2021 by Bob Ciura
Spreadsheet data updated daily
In poker, the blue chips have the highest value. We don’t like the idea of using poker analogies for investing. Investing should be far removed from gambling.
With that said, the term “blue chip” has stuck for a select group of stocks….
So what are blue chip stocks?
Blue chip stocks are established, safe, dividend payers. They are often market leaders and tend to have a long history of paying rising dividends. Blue chip stocks tend to remain profitable even during recessions.
At Sure Dividend, we define Blue Chip stocks as companies that are members of 1 or more of the following 4 lists:
- Dividend Achievers (10+ years of rising dividends)
- Dividend Aristocrats (25+ years of rising dividends)
- Dividend Kings (50+ years of rising dividends)
You can download the complete list of all 260+ blue chip stocks (plus important financial metrics such as dividend yield, P/E ratios, and payout ratios) by clicking below:
Click here to download your Excel spreadsheet of all 260+ blue chip stocks, including metrics that matter like dividend yield and the price-to-earnings ratio.
In addition to the Excel spreadsheet above, this article covers our top 7 best blue chip stock buys today as ranked using expected total returns from the Sure Analysis Research Database.
Our top 7 best blue chip stock list excludes MLPs and REITs. The table of contents below allows for easy navigation.
Table of Contents
- The 7 Best Blue Chip Stocks Today
Blue Chip Stock #7: Altria Group (MO)
Blue Chip Stock #6: Farmers & Merchants Bancorp (FMCB)
Blue Chip Stock #5: Verizon Communications (VZ)
Blue Chip Stock #4: Principal Financial Group (PFG)
Blue Chip Stock #3: Novartis AG (NVS)
Blue Chip Stock #2: AT&T Inc. (T)
Blue Chip Stock #1: Telephone & Data Systems (TDS)
The spreadsheet and table above give the full list of blue chips. They are a good place to get ideas for your next high quality dividend growth stock investment…
Our top 7 favorite blue chip stocks are analyzed in detail below.
The 7 Best Blue Chip Buys Today
The 7 best blue chip stocks as ranked by expected total return from The Sure Analysis Research Database (excluding REITs and MLPs) are analyzed in detail below. In this section, stocks were further screened for satisfactory Dividend Risk score of ‘C’ or better.
Blue Chip Stock #7: Altria Group (MO)
- Dividend History: 51 years of consecutive increases
- Dividend Yield: 7.3%
Altria Group is a consumer products giant. Its core tobacco business holds the flagship Marlboro cigarette brand. Altria also has non-smokable brands Skoal and Copenhagen chewing tobacco, Ste. Michelle wine, and owns a 10% investment stake in global beer giant Anheuser Busch Inbev (BUD).
Related: The 6 Best Tobacco Stocks Now, Ranked In Order
Altria is a legendary dividend stock, because of its impressive history of steady increases. Altria has raised its dividend for 51 consecutive years, placing it on the very exclusive list of Dividend Kings.
On January 28th, Altria reported financial results for the fourth quarter and full year. Revenue (net of excise taxes) of $5.05 billion increased 5.3% year-over-year. Cigarette volumes surprisingly increased 3.1% for the quarter, reversing many quarters of volume declines. Adjusted earnings-per-share declined 2% for the fourth quarter.
Source: Investor Presentation
For the full year, revenue net of excise taxes increased 5.3% to $20.84 billion, while adjusted earnings-per-share increased 3.6% to $4.36 for 2020. For 2021, Altria expects adjusted diluted EPS in a range of $4.49 to $4.62, representing a growth rate of 3% to 6% from 2020.
Altria’s key challenge going forward will be to generate growth in an era of falling smoking rates. Consumers are increasingly giving up traditional cigarettes, which on the surface poses an existential threat to tobacco manufacturers.
For this reason, Altria has made significant investments in new categories, highlighted by the $13 billion purchase of a 35% stake in e-vapor giant JUUL. This acquisition gives Altria exposure to a high-growth category that is actively contributing to the decline in traditional cigarettes.
These investments could provide Altria much-needed growth as the cigarette market steadily declines. It has also invested in its own heated tobacco product line called IQOS and Marlboro HeatSticks, which the company continued to expand in 2020.
Altria also recently announced a $1.8 billion investment in Canadian marijuana producer Cronos Group. Altria purchased a 45% equity stake in the company, as well as a warrant to acquire an additional 10% ownership interest in Cronos Group at a price of C$19.00 per share, exercisable over four years from the closing date.
The stock has a P/E ratio of 10.2, below our fair value estimate of 11.0. The stock also has a 7.3% dividend yield. Including expected EPS growth of 2.4% per year, total returns are expected to reach 10.4% per year over the next five years.
Blue Chip Stock #6: Farmers & Merchants Bancorp (FMCB)
- Dividend History: 56 years of consecutive increases
- Dividend Yield: 2.0%
Founded in 1916, Farmers & Merchants Bancorp is a locally owned and operated community bank with 32 locations in California. Due to its small market cap (~$600 million) and its low liquidity, it passes under the radar of most investors. Nevertheless, F&M Bank has paid uninterrupted dividends for 86 consecutive years and has raised its dividend for 56 consecutive years.
The company is conservatively managed and, until four years ago, had not made an acquisition since 1985. However, in the last four years, it has begun to pursue growth more aggressively. It acquired Delta National Bancorp in 2016 and increased its locations by 4. Moreover, in October-2018, it completed its acquisition of Bank of Rio Vista, which has helped F&M Bank to further expand in the San Francisco East Bay Area.
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In early February, F&M Bank reported (2/4/21) financial results for 2020. Despite the pandemic and the suppressed interest rates, the bank grew its earnings-per-share 4.8% over the prior year, and thus achieved record earnings-per-share of $74.03 for the full year. Net interest income grew 6.2% in 2020, thanks to 16.1% growth in loans, while deposits grew 24%.
Unlike most banks, which recorded significant loan loss provisions due to the pandemic, F&M Bank has booked provisions for loan losses equal to only 1.9% of its total portfolio. It was also able to enhance its net interest margin from 3.80% in the third quarter to 3.86% in the fourth quarter. Despite the impact of the pandemic on the economy, management is optimistic for this year thanks to the sustained business momentum.
Shares trade for a P/E ratio of ~10, compared with our fair value estimate of 12. An expanding valuation multiple could increase annual returns modestly each year. Combined with 5% expected EPS growth and the 2.0% dividend yield, total returns are expected to reach 10.5% per year over the next five years.
Blue Chip Stock #5: Verizon Communications (VZ)
- Dividend History: 14 years of consecutive increases
- Dividend Yield: 4.4%
Verizon Communications was created by a merger between Bell Atlantic Corp and GTE Corp in June 2000. Verizon is one of the largest wireless carriers in the country. Wireless contributes three-quarters of revenues, while broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.
Verizon reported fourth quarter and full year results on 1/26/2021. The company’s adjusted earnings-per-share for the quarter totaled $1.21, 7.1% better than the prior year and $0.04 higher than expected. Revenue fell 0.2% to $34.7 billion, but was $230 million above estimates. For the year, adjusted EPS grew 1.9% to $4.90, $0.04 above our estimates. Revenue declined 2.7% to $128.3 billion.
Once again, Verizon Wireless led the way for the company last year.
Source: Investor Presentation
The company had postpaid phone net adds of 279K and wireless postpaid net additions of 703K for the quarter, though both figures came in below consensus estimates. Retail postpaid churn was 0.76% while wireless retail postpaid churn was 0.98%. Revenues for the Consumer segment fell 1.2% to $23.9 billion mostly due to lower equipment revenue.
Verizon’s strong cash flow fuels its consistent dividends. In 2020, cash from operations for the year grew almost 17% to $41.8 billion while free cash flow was higher by 32.4% to $23.6 billion. These were excellent growth rates, especially considering the difficult overall environment. Verizon expects adjusted EPS for 2021 in a range of $5.00 to $5.15.
One of Verizon’s key competitive advantages is that is often considered the best wireless carrier in the U.S. This is evidenced by the company’s wireless net additions and very low churn rate. This reliable service allows Verizon to maintain its customer base as well as give the company an opportunity to move customers to higher-priced plans. Verizon is also in the early stages of rolling out 5G service, which will give it an advantage over other carriers.
Verizon stock trades for a 2021 P/E ratio of 11.1, compared with our fair value P/E of 13. Combined with expected EPS growth of 4% and the 4.4% dividend yield, total returns are estimated to reach 10.7% per year.
Blue Chip Stock #4: Principal Financial Group (PFG)
- Dividend History: 12 years of consecutive increases
- Dividend Yield: 4.1%
Principal Financial Group is a financial corporation that operates several businesses including insurance (primarily life insurance), investment management, retirement solutions, and asset management. Principal Financial Group reported its fourth-quarter earnings results on January 28th. Assets under management, or AUM, grew to $810 billion, partially due to rising equity markets which boosted Principal Financial’s equity AUM.
The company’s Retirement and Income Solutions business also performed well during the quarter.
Source: Investor Presentation
Principal Financial Group generated earnings-per-share of $1.48 during the fourth quarter, up 5% compared to the same quarter last year.
For 2020, profits declined from 2019 based on the impact of the coronavirus pandemic, but there was not a steep decline in profitability. Earnings-per-share in 2021 will likely be up again, and current estimates forecast new record profits for the company during the current year.
Principal Financial Group recorded a highly compelling average annual earnings-per-share growth rate of 12% between 2008 and 2019. Growth was a bit uneven, though, as there were some years where profits declined. The company’s asset management business, where Principal Global Investors and Retirement & Income Solutions are the main components, has benefited from solid AUM growth. We expect 5% annual EPS growth over the next five years.
Shares trade for a 2021 P/E ratio of ~9, based on expected EPS of $6.15 for 2021. Our fair value P/E estimate is a P/E ratio of 11. The combination of P/E expansion, EPS growth and the 3.7% dividend yield leads to expected returns of 10.8% per year.
Blue Chip Stock #3: Novartis AG (NVS)
- Dividend History: 25 years of consecutive increases
- Dividend Yield: 4.0%
Novartis is a healthcare giant based in Europe. The company’s Innovative Medicines division offers medicines in the areas of oncology, cardiovascular, dermatology, respiratory and several others. Novartis’ Sandoz division markets generic drugs. Novartis has annual sales of more than $52 billion.
Novartis reported fourth-quarter and full-year results 1/26/2021. The company’s earnings-per-share of $1.34 was a 1.5% increase from the prior year but $0.05 lower than expected. Revenue improved 3% to $12.8 billion, but missed estimates by $104 million. For the year, earnings-per-share grew 9.5% to $5.78, $0.06 ahead of our estimates. Revenue grew 2.6% to $48.7 billion.
Source: Investor Presentation
Among the quarterly highlights, Innovative Medicines grew 1% for the quarter as 6% volume growth was nearly offset by pricing pressure due to generic competition. Cosentyx, which treats plaque psoriasis and is the company’s top selling product, continues to perform well, producing 13% growth year-over-year even as there were fewer new patients starts related to COVID-19. Entresto, which is used to treat chronic heart failure, was higher by 45% to $632 million due to higher patient market share.
Novartis has a positive growth outlook. The chief competitive advantage for Novartis is its Innovative Medicines division, which has shown impressive growth over the last year. Four different products have reached the $1 billion annual sales mark. Another key advantage for the company is Novartis’ willingness to spend on research and development. The company spent more than $9 billion on R&D over the last year. This level of R&D spending should pay off as Novartis expects to bring to market 14 different products over the next two years with the potential for at least a billion dollars in peak sales.
Novartis pays an annual dividend, with the most recent announcement stating the company is increasing its 2021 dividend 1.7% to $3.38 per share in USD. The company has increased its dividend 25 consecutive years in local currency. With a 4% dividend yield, expected EPS growth of 4% per year and a ~3.2% annual boost from a rising P/E multiple, we expect total returns of 11.2% per year over the next five years for Novartis stock.
Blue Chip Stock #2: AT&T Inc. (T)
- Dividend History: 36 years of consecutive increases
- Dividend Yield: 6.9%
AT&T is the largest communications company in the world, operating in four distinct business units: AT&T Communications (providing mobile, broadband and video to 100 million U.S. consumers and 3 million businesses), WarnerMedia (including Turner, HBO and Warner Bros.), AT&T Latin America (offering pay-TV and wireless service to 11 countries) and Xandr (providing advertising).
On January 27th, 2021 AT&T reported Q4 and full-year 2020 results. For the quarter, the company generated $45.7 billion in revenue, down from $46.8 billion in Q4 2019, as the COVID-19 pandemic continues to weigh on results. Reported net income equaled a loss of -$13.9 billion or -$1.95 per share due to non-cash charges. On an adjusted basis, earnings-per-share equaled $0.75 compared to $0.89 in the year-ago quarter. The $0.75 figure does not adjust for -$0.08 in COVID-19 impacts.
Source: Investor Presentation
For the year AT&T generated $171.8 billion in revenue, down from $181.2 billion in 2019. The pandemic impacted revenue across all businesses particularly, WarnerMedia and domestic wireless service revenues. On an adjusted basis earnings-per-share equaled $3.18 for 2020, versus $3.57 in 2019. This figure does not adjust for -$0.43 in COVID-19 impacts. AT&T ended the quarter with a net debt-to-EBITDA ratio of 2.70x.
AT&T also provided a full year 2021 outlook. For this year, the company anticipates 1% revenue growth, adjusted earnings-per-share to be stable with 2020 and a dividend payout ratio in the high-50% range.
On February 25th, AT&T announced it will spin off multiple assets into a separate company called New DIRECTV that will own and operate the DirecTV satellite TV business, as well as AT&T TV and U-verse video. AT&T will own 70% of the company, and will sell 30% ownership to TPG for approximately nearly $8 billion, which will be used to pay down debt.
Two individual growth catalysts for AT&T are 5G rollout and its recently-launched HBO Max service. AT&T continues to expand 5G to more cities around the country. AT&T’s 5G service now covers more than 120 million people.
On May 27th, AT&T launched streaming platform HBO Max. At the end of 2020, AT&T had 41 million combined HBO Max and HBO subscribers in the United States. The new platform is a critical step for AT&T to keep up in the streaming wars..
AT&T is optimistic about generating reasonable growth and the payout ratio had been falling, resulting in excess funds to divert toward paying down debt. With a long history of increasing dividends each year (AT&T is a Dividend Aristocrat) we expect the company’s dividend payout to remain secure, even in a recession.
Blue Chip Stock #1: Telephone & Data Systems (TDS)
- Dividend History: 45 years of consecutive increases
- Dividend Yield: 3.3%
Telephone & Data Systems is a telecommunications company that provides customers with cellular and landline services, wireless products, cable, broadband, and voice services across 24 U.S. states. The company’s Cellular Division accounts for more than 75% of total operating revenue. TDS started in 1969 as a collection of 10 rural telephone companies. Today, the company generates more than $5 billion in annual revenues.
On February 18th, TDS reported financial results for the fourth quarter. The company grew its total operating revenues by 3% to $1.38 billion. Diluted earnings were $14 million for the company, up 17% from last year’s $12 million. Quarterly diluted earnings per share grew from $0.10 to $0.12, a 20% increase.
For the full year, total operating revenues grew 1% to $5.23 billion compared to $5.18 billion in 2019. Diluted earnings per share grew at a very high rate of 87% in 2020, to $1.93 compared with $1.03 per share in 2019. Postpaid churn rate was identical year-over-year at 1.21%. Total wireline connections grew 1% for the year, and cable connections grew 1.8%, bolstered by the acquisition of Continuum. Revenues in the cable segment increased 18% for the year.
U.S. Cellular was the driving force behind TDS’ growth last year.
Source: Investor Presentation
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Telelphone & Data Systems operates in the competitive telecommunications industry. Price wars are common among telecoms in the constant battle for subscribers. That said, the entire industry benefits from a high level of concentration. There are only a few major telecoms (AT&T, Verizon and T-Mobile) that dominate the U.S. market. Building a new network large enough to compete with the established giants, TDS included, would be extremely prohibitive.
TDS has historically held up extremely well during recessions; consumers are very reluctant to cut their telecommunications services like wireless, broadband, and cable, even during an economic downturn. For example, during the Great Recession, TDS’ earnings-per-share actually increased 69% from 2008-2010. The company has remained profitable during the current period of economic weakness caused by the coronavirus pandemic.
Much of TDS’ future growth potential depends on U.S. Cellular, as TDS has an 82% stake in U.S. Cellular. The company has a mixed track record when it comes to growth. During the last decade, its earnings-per-share have declined approximately 2.6% compounded-per-year on average. While the earnings trend has been volatile, book value per share has grown by 2.0% per year over the last decade. We expect 1.5% annual earnings-per-share growth over the next five years. Earnings growth will be achieved through a mix of revenue growth and margin improvements.
Shareholder returns will be boosted by a rising valuation multiple, expected EPS growth of 1.5%, and the current dividend yield of 3.3%. Overall, total returns are expected to reach 12.2% per year over the next five years.
Final Thoughts
Stocks with long histories of increasing dividends are often the best stocks to buy for long-term dividend growth and high total returns. But just because a company has maintained a long track record of dividend increases, does not necessarily mean it will continue to do so in the future. Investors need to individually assess a company’s fundamentals, particularly in times of economic distress.
The coronavirus pandemic of 2020 had a significant impact on the global economy, but high-quality blue chips such as the 7 in this article continued to generate profits, and pay dividends to shareholders. They also have compelling valuations that make them attractive picks for investors interested in total returns.
Click here to download your Excel spreadsheet of all 260+ blue chip stocks, including metrics that matter like dividend yield and the price-to-earnings ratio.
Back to all scannersLooking for growing, well capitalized blue chip dividend stocks? Below are 100 stocks you'll love, updated daily for 2020.Blue Chip Stocks Paying High Dividends
Blue chip stocks are the big boys on wall street.
While there isn’t a single definition for blue chip stocks, they are usually higher market cap, stable, dividend paying companies with strong free cash flow.
These companies have dependable, long-term earnings per share, high yields, and dominate their industry with a large market share. Their market share, history and ability to take advantage of economies of scale, usually means they benefit from holding the pricing power in their industries.
You’ll notice that these companies typically have better profit margins, lower risk of bankruptcy, and lower cost of capital than their competitors. Because of these characteristics, investors are eager to find and invest in awesome blue chip stocks.
Using the DiscoverCI Stock Screener, we scan the stock market for the top blue chip dividend stocks meeting the following criteria:
- Current Ratio Greater Than 1.50,
- Market Cap Greater Than $1 billion,
- Debt to Equity Ratio Less Than 1.00,
- Earnings Growth Greater Than 5%
- Dividend Yield Greater than 2%, and
- Dividend Payout Ratio Less Than 100%.
Companies meeting our criteria are stable, well-capitalized companies with high market caps, strong dividends and reasonable payout ratios.The list is sorted by dividend yield from high to low. Below are the 100 best blue chip dividend stocks to buy in 2020.
We update this list daily. Last updated: March 9th, 2021