In Wall Street parlance, blue chip means quality. Blue-chip stocks represent mature, reputable, financially sound companies with established histories of reliable performance.
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Like all stocks, blue chips fluctuate up and down with the market and other factors. Still, savvy investors consider blue-chip stocks a safer, more conservative investment compared to stocks of smaller, less well-established companies.
Another benefit to owning blue chips is that they often pay regular, rising dividends that provide shareholders with a dependable and growing income.
We took a look at the universe of blue-chip stocks and compiled this list of the nine best blue-chip dividend stocks income investors should own:
| Stocks | Sector | Market capitalization | 12-month dividend yield |
| AT&T Inc. (ticker: T) | Communications services | $117 billion | 6.8% |
| Clorox Co. (CLX) | Consumer defensive | $17.9 billion | 3.3% |
| Consolidated Edison Inc. (ED) | Utilities | $31.3 billion | 3.6% |
| General Dynamics Corp. (GD) | Industrials | $67.9 billion | 2.6% |
| Exxon Mobil Corp. (XOM) | Energy | $387.6 billion | 3.8% |
| Walgreens Boots Alliance Inc. (WBA) | Health care | $19 billion | 7.6% |
| PepsiCo Inc. (PEP) | Consumer defensive | $228.8 billion | 3% |
| McDonald’s Corp. (MCD) | Consumer cyclical | $211.2 billion | 2.1% |
| Hormel Foods Corp. (HRL) | Consumer defensive | $17.1 billion | 3.6% |
AT&T Inc. (T)
AT&T is one of the original blue chips. The company was established way back in 1885 as a subsidiary of the Bell Telephone Co. Then known as American Telephone and Telegraph, T enjoyed a near-total monopoly on U.S. phone service. Government regulators broke up that monopoly in 1982 and T, along with the other regional bell companies, became independent entities.
Today, T provides telecommunications, media content, mobile phone service and technology to individuals and institutions globally with concentrations in North America and Latin America.
The company has struggled to make the transition from a regional bell operating company to a high-tech, global communications company, but it embarked on an aggressive, long-term growth strategy in spring 2022 that seems to be producing results.
Bank of America securities analyst David Barden says T is on track to generate more than $16.5 billion in free cash flow in 2024. He has a 12-month price target of $20 on the stock, which represents a 21.9% price increase from its Jan. 17 closing price.
Market cap: $117 billion 12-month yield: 6.8% Sector: Communications services
Clorox Co. (CLX)
The next blue-chip company on our list was founded 114 years ago and has its headquarters in Oakland, California. CLX is best known for manufacturing consumer and industrial cleaning products and distributing them all over the world. Many of the company’s brands are so well established that they can honestly be called iconic. Clorox is an established leader in sanitation, laundry and personal hygiene, and it made strong inroads in packaged food and pet products.
CLX published its fiscal 2023 financial results in September 2023. According to that report, the company generated $2 billion in revenue for the year compared to $1.8 billion in fiscal 2022, an impressive 11% year-over-year increase.
CLX also has a long history of paying and increasing its regular dividend. That fact has earned it a spot in the exclusive Dividend Aristocrats Index.
Market cap: $17.9 billion 12-month yield: 3.3% Sector: Consumer defensive
Consolidated Edison Inc. (ED)
ED is a regulated utility that provides gas, electric and steam power services in New York. In New York City, the company services all of Manhattan, the Bronx and some parts of Queens. Beyond the city, ED is the primary power company for Westchester County. ED also has customers in Northern New Jersey.
Financial results aren’t in for 2023 yet, but — based on the company’s first three quarterly reports — it’s estimated that ED will generate $15 billion from its New York and New Jersey customers last year. Daniel Rich, an equity analyst at research firm CFRA Research, expects that number to climb to $15.5 billion in 2024.
ED has not yet declared its dividend for the first quarter of 2024, but we do know that it distributed $3.24 per share in 2023 and that the company’s board of directors has raised the dividend for 50 consecutive years. Investors are optimistic about a dividend increase soon.
Market cap: $31.3 billion 12-month yield: 3.6% Sector: Utilities
General Dynamics Corp. (GD)
GD is a blue-chip dividend stock prominent in the aerospace and defense arena. The company has four major divisions: aerospace, marine systems, combat systems and technologies.
The aerospace division makes high-tech military aircraft. The marine systems division makes nuclear-powered submarines as well as military and commercial ships. The combat systems division makes armored military vehicles and associated weapons systems. The technologies division designs and builds the high-tech computers and communications equipment that go in all the vehicles, aircraft and ships they make.
General Dynamics’ best customers are the U.S. military and other NATO countries that have all ramped up defense spending in the wake of the war in Ukraine. In other words, business is booming at GD.
The company is poised to report over $42 billion in revenue when it publishes its 2023 earnings later this year. That’s more than enough to support its current dividend of $5.28 a share.
Market cap: $67.9 billion 12-month yield: 2.6% Sector: Industrials
Exxon Mobil Corp. (XOM)
When Jersey Standard Oil changed its name to Exxon Corp. in 1972, it was already a giant in the oil and gas industry. When it merged with Mobil Oil Corp. in 1999 to form Exxon Mobil, it became an energy behemoth. At that time, the company was mostly involved in the upstream, or production, and the downstream, or distribution, of traditional hydrocarbon energy sources. Today, in addition to oil and gas, XOM is highly prominent in cleaner and greener energy types and has a large and fast-growing chemical division.
In the first three quarters of 2023, XOM produced $255 billion in revenue. As we await the company’s fourth-quarter results, Wall Street is expecting the full 2023 revenue number to come in at around $345 billion.
XOM is proud of the fact that it has raised its dividend for 41 years in a row. Its annualized dividend payout, based on its most recent dividend, comes to $3.80 per share. Income investors are optimistic about seeing another increase soon.
Market cap: $387.6 billion 12-month yield: 3.8% Sector: Energy
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Walgreens Boots Alliance Inc. (WBA)
With a total of 8,600 locations, Walgreens pharmacy retail stores can be found on street corners in every state in America. Most are east of the Mississippi River, but the company that John Boot and Charles Walgreen founded 115 years ago has managed to expand not only throughout the continental U.S. but to Alaska, Hawaii and all U.S. territories except American Samoa, Guam and the Northern Mariana Islands. It’s safe to call this dividend stock a true blue chip.
The company still bills itself as a pharmacy, but Walgreens stores also sell general merchandise, nonperishable food, cold drinks and a variety of health, beauty, fragrance and wellness products.
All those product offerings, on top of its thriving prescription drug business at prominent locations in more than 3,400 cities, contributed to the $139 billion in revenue the company reported in fiscal 2023. With that kind of revenue supporting its generous dividend, we feel confident putting WBA on this list.
Market cap: $19 billion 12-month yield: 7.6% Sector: Health care
PepsiCo Inc. (PEP)
PepsiCo manufactures, markets and distributes snacks, drinks and other consumables worldwide. Most Americans are familiar with PEP’s iconic brands, which include Pepsi, Frito-Lay, Quaker Foods and dozens more.
PEP earned a spot on our list due to its very strong cash flow, earnings stability and strong balance sheet. The $4.95 annual dividend is safe when we consider the $92 billion in revenue the company is expected to report for fiscal 2023, and it has the potential to grow from here.
There are risks to owning PEP, but they mostly involve a possible reemergence of inflation or a recession in the upcoming year — both of which could dampen demand for PEP products — rather than faulty execution of its business plan.
Market cap: $228.8 billion 12-month yield: 3% Sector: Consumer defensive
McDonald’s Corp. (MCD)
There can be no doubt about MCD’s status as a blue chip, and the company’s inclusion in the Dividend Aristocrats Index demonstrates its strength as a dividend stock.
MCD operates company-owned and franchised fast-food restaurants throughout the developed world. The company will occasionally change and adapt its menu, but, since its founding in 1940, it’s remained remarkably consistent with its core offerings of burgers, chicken, fried fish and fries.
More than 40,000 locations around the world combined to produce over $110 billion in revenue cumulatively over the last five years.
With those kinds of numbers being produced by one of the most recognized brands on earth, it’s no surprise that MCD has increased its dividend for 48 consecutive years, including an overall increase of 7% over the last five years.
Market cap: $211.2 billion 12-month yield: 2.1% Sector: Consumer cyclical
Hormel Foods Corp. (HRL)
George Hormel founded HRL in 1892. The company’s beginnings as a Midwestern dairy and meat packing firm were certainly humble. Today, however, HRL is a processed food giant with revenues of $12 billion a year and a market cap exceeding $17 billion.
The company operates through three divisions: retail, food service and international. The retail segment processes and sells packaged food to grocery stores and other retail outlets in North America. The food service segment concentrates on marketing food and nutritional products to commercial customers such as restaurants and wholesalers. Finally, the international segment sells to stores and restaurants around the world.
Except for T, which has kept its dividend steady for the last two years, all the blue-chip stocks on our list are dividend aristocrats. HRL has an even more exceptional status. HOR is what is known as a dividend king, meaning it is a member of the S&P 500 and has increased its dividend for a minimum of 50 consecutive years. That is a truly exceptional achievement.
Market cap: $17.1 billion 12-month yield: 3.6% Sector: Consumer defensive
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9 Best Blue-Chip Dividend Stocks originally appeared on usnews.com
Update 01/18/24: This story was previously published at an earlier date and has been updated with new information.
