Dividends are regular payments made to shareholders from a company’s net profit. Most of the dividend stocks pay investors a fixed amount each quarter. The top ones raise their payouts over time so that investors can create an annuity-like cash stream. Blue-chip dividend stocks can add stability to an investor’s portfolio. These stocks can be one of the most promising investment opportunities for regular income and capital appreciation.
What are blue-chip stocks?
Blue-chip stocks are shares of fundamentally strong and financially sound companies. These companies have large market capitalization and an enviable market reputation. Blue-chip stocks usually have the following things in common.
- Blue-chip stocks are often large-cap stocks, which usually means they have a market capitalization of over $10 billion.
- Blue-chip stocks have a reliable and strong background of sustained growth as well as positive future prospects.
- Blue-chip stocks are a part of major market indexes like the Dow Jones Industrial Average, the Nasdaq 100, or the S&P 500.
- Most of the blue-chip stocks reward their shareholders with consistent and increasing dividends.
Which blue-chip stocks pay dividends?
When building a dividend portfolio, it's better to have it diversified across multiple industries instead of concentrating on stocks that offer the highest dividend yields. The following are some of the best blue-chip dividend stocks to buy in 2021.
- Worth about $400 billion, Johnson & Johnson (JNJ) pays a 2.6 percent dividend yield, which is around double the rate that U.S. 10-year Treasurys pay. JNJ is best known for its famous consumer products like baby shampoo, band-aids, and Tylenol. The company generates regular income from its business operations in pharmaceuticals and medical devices. In 2021, analysts expect the company’s EPS to rise by about 12 percent.
- JPMorgan Chase is one of the largest investment banks and financial services providers in the U.S. The company is worth more than $400 billion and pays a 2.5 percent dividend yield. Currently, JPMorgan Chase uses about 47 percent of its earnings to distribute dividends, which leaves a significant cushion for challenging times and room to raise the dividend in the future.
- AT&T is one of the largest wireless service providers in the U.S. The company is worth more than $200 billion and pays a 7.3 percent dividend yield. AT&T generates regular income from its wireless phone and broadband subscribers. AT&T also owns subscription video-on-demand streaming service HBO Max.
How to invest in blue-chip stocks
Investors can buy blue-chip stocks through brokerage companies like Robinhood, TD Ameritrade, and E-Trade. Investors can directly buy shares after consulting with an investment adviser or performing their own research on the best blue-chip dividend stocks. Evaluate the company’s historical financial performance to understand the dividend payments and earnings trend. Investors can even purchase a basket of stocks by investing in ETFs or mutual funds.
Outlook for blue-chip stocks
Usually, blue-chip stocks have an excellent long-term outlook. Their features make them more likely to survive any downturn in the markets. Blue-chip companies know how to handle even the most challenging situations. In contrast, small-cap companies might not survive a significant fall in revenue or the prolonged impacts of a recession.