Blue-chip stocks have long been a favored investment for conservative equity investors. Many blue-chip companies distribute regular, quarterly dividends to their shareholders. Dividends provide investors with dependable current income. This steady stream of passive income can enhance the total return potential of a stock during bull markets and act as a sort of cushion during bear markets by providing regular cash distributions.
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For these reasons, dividend-paying blue-chip stocks are highly attractive for income-oriented investors with a conservative investment outlook.
What Are Blue-Chip Stocks?
The term “blue chip” has an interesting history. The phrase originated in in the rough-and-tumble poker parlors and gambling houses of early-20th-century America where the blue-colored poker chips had the highest value. As the American economy expanded and the stock market became prominent, the term was adopted by brokers and investors.
Today, in the context of investing, the phrase “blue chip” means companies that are well established, stable and reliable. They have strong and dependable revenue streams and have demonstrated the ability to produce solid earnings over the long run. The aspect of stability blue chips offer can provide investors with a sense of security even during economic slowdowns and bad markets. In short, blue-chip stocks are considered to be high-quality, stable companies with impressive long-term track records. That said, no stocks are without risk.
What Are the Benefits of Dividends?
Dividends provide investors with steady income, and often grow payouts over time. This can be attractive to any investor, but will especially appeal to retirees and others who rely on their investments to provide income.
Additionally, dividends — especially dividends that increase over time — can act as a hedge against inflation and mitigate the impact of stock price drawdowns and bear markets.
Dividends are often taken as a sign of a stock’s financial strength and management’s confidence in a company’s future prospects, and are an important aspect of a stock’s total return, which includes both capital appreciation and income.
Here are seven of the best dividend-paying blue-chip stocks to buy now:
| Stock | Sector | Market Capitalization | Dividend yield |
| Atmos Energy Corp. (ticker: ATO) | Utilities | $18 billion | 2.7% |
| AbbVie Inc. (ABBV) | Health care | $282 billion | 3.8% |
| 3M Co. (MMM) | Industrials | $54 billion | 6.1% |
| Exxon Mobil Corp. (XOM) | Energy | $458 billion | 3.3% |
| Sysco Corp. (SYY) | Consumer defensive | $37 billion | 2.8% |
| Caterpillar Inc. (CAT) | Industrials | $163 billion | 1.6% |
| Pfizer Inc. (PFE) | Health care | $156 billion | 6.2% |
Atmos Energy Corp. (ATO)
With more than 3 million customers spread across eight states, ATO is one of the largest blue-chip, regulated natural gas utilities in the U.S. The company provides natural gas distribution, transmission and storage services to both residential and commercial clients in its vast service area.
Like all regulated utilities, the company’s rates and the range of services it provides are overseen by regulatory bodies in each state it serves. This can be a challenge when it wants to raise prices, but on the other hand, this business model limits competition and gives the company and its shareholders a measure of stability when it comes to cash flow and earnings.
ATO has an excellent history of long-term revenue and earnings growth. In 2024 it’s projected to report $4.7 billion in revenue, and Wall Street is expecting that number to increase more than 8% to $5.1 billion next year.
Additionally, ATO has an established history of paying dividends. In fact, the company is a member of the exclusive “Dividend Aristocrats,” an elite group of S&P 500 constituents that have raised dividend payouts annually for at least 25 consecutive years.
Market cap: $18 billion Current yield: 2.7% Sector: Utilities
AbbVie Inc. (ABBV)
As a stand-alone company, ABBV is only 11 years old. By most standards that’s a little young to be considered a true blue-chip stock. But ABBV can really trace its roots back to Abbott Laboratories (ABT), which was founded way back in 1888. ABBV was spun off from ABT in 2013.
ABBV is an independent biopharmaceutical company with an intense focus on developing and distributing advanced treatments for complicated, serious diseases.
ABBV manufactures and markets Humira (adalimumab), which is one of the best-selling drugs on Earth for the treatment of arthritis, psoriasis and Crohn’s disease. And that’s just one of dozens of blockbuster pharmaceuticals the company has in its extensive portfolio.
In addition to its established products, ABBV is dedicated to growing its offerings through vigorous research and development efforts, as well as through collaborations with other innovative companies. It’s making a sustained effort to produce breakthroughs in immunology and neuroscience, always with a focus on successful patient outcomes.
The company is expected to report $55.1 billion in revenue this year, with analysts expecting 5.7% growth to $58.2 billion in 2025.
Market cap: $282 billion Current yield: 3.8% Sector: Health care
3M Co. (MMM)
MMM is classified as an industrial company but, make no mistake, this $54 billion firm is very high tech. MMM is a leader in important global industries that include electronics, health care and transportation. But of all the hundreds of products and services it offers, the company may be best known for its world-famous, yellow Post-It notes.
MMM has a long-standing commitment to creating value for its shareholders, its customers and the community as a whole. It’s famously diversified across product offerings and industries, but is also making a sustained push to become a leader in the field of material science. Its goal is to achieve long-term growth through continuous innovation.
On May 1, J.P. Morgan upgraded the stock from “neutral” to “overweight,” giving it a price target of $111, implying 12.8% upside from its May 1 close at $98.44.
Market cap: $54 billion Current yield: 6.1% Sector: Industrials
Exxon Mobil Corp. (XOM)
XOM is one of the largest and best-known blue-chip energy companies on earth. The modern version of the company was formed in 1999 when Exxon Corp. — a descendant of John D. Rockefeller’s Standard Oil — merged with Mobil Oil Corp. to become Exxon Mobil Corp.
In its early years the company was mostly involved in the production and distribution of oil and refined oil products. Today, XOM is a world leader in industrial chemicals and all aspects of the oil and natural gas industry. The company is also expanding in the areas of green, renewable and sustainable energy.
The company trades for just 12.6 times forward earnings at current levels.
Income investors will be happy to know that XOM has a long track record of increasing its annual dividend. In fact, the company has raised its payout for 41 consecutive years.
Market cap: $458 billion Current yield: 3.3% Sector: Energy
Sysco Corp. (SYY)
Texas-based Sysco is a well-established leader in the prepared, frozen and fresh food services industry. Through its extensive network of subsidiaries and partners, the company supplies all types of food and food-related products to the restaurant industry and just about any facility or organization that sells or serves ready-to-eat foodstuffs.
Its principal customers are restaurants, but it provides products and services to thousands of hotels, stores, hospital cafeterias, entertainment venues, night clubs, casinos and other establishments. Basically, if you’re a business that provides any level of dine-in or take-out food service, you are a potential client of SYY.
And SYY sells more than just edibles. Additionally, it offers hundreds of related products like silverware, glassware, kitchen equipment, tables and chairs, and almost anything else related to preparing and serving meals. Trading for just 15.3 times forward earnings, SYY stock looks attractively valued at current levels.
Market cap: $37 billion Current yield: 2.8% Sector: Consumer defensive
Caterpillar Inc. (CAT)
People all over the world are familiar with the black-trimmed, bright yellow construction vehicles and heavy equipment manufactured by CAT. This company is one of the most well-known heavy machinery builders on Earth.
Caterpillar is headquartered in Irving, Texas, but has offices and operations in many developed nations. It designs, manufactures and sells mining equipment, large natural gas and diesel engines, turbines, locomotives, trucks, bulldozers, industrial marine vessels, and many more kinds of heavy equipment.
But CAT doesn’t just sell vehicles and equipment, it finances them as well. The company’s financial division provides installment financing to its customers and is a major contributor to the firm’s revenue and profit.
Analysts expect revenue to rise about 3.9% next year to $68.7 billion in 2025.
Market cap: $163 billion Current yield: 1.6% Sector: Industrials
Pfizer Inc. (PFE)
The New York-based Pfizer is an international pharmaceutical giant that markets and distributes drugs and biopharmaceutical products. The company’s primary areas of operation are in the U.S. and Europe, though its products are sold all around the world.
In addition to an extensive portfolio of drug treatments, PFE is prominent in vaccines and other therapeutics. Through its large network of salespeople and distributors, the company offers its products to hospitals, retail establishments, drug wholesalers, governments and institutions, pharmacies, and large and small medical practices.
Additionally, Pfizer has mutually beneficial collaboration agreements with many other large health care companies like Bristol-Myers Squibb Co. (BMY), Merck & Co. Inc. (MRK) and Astellas Pharma Inc. (OTC: ALPMY), among others.
According to the product pipeline page of the company’s website, Pfizer has 37 new drugs in late-stage development along with 28 in mid-stage and 45 in early-stage testing. This is one of the most extensive and promising pipelines in the drug development industry.
Analysts expect earnings per share to grow 21% in 2024, followed by 23% growth in 2025.
Market cap: $156 billion Current yield: 6.2% Sector: Health care
[READ: 10 of the Best Stocks to Buy for 2024]
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7 Best Blue-Chip Dividend Stocks to Buy originally appeared on usnews.com
Update 05/02/24: This story was previously published at an earlier date and has been updated with new information.
