Investing
5 Incredible Blue Chip Stocks With 6% or Higher Dividends
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Even though interest rates have plunged back to the levels seen six and seven years ago, the reality is that we are in some of the lowest rate levels in over a generation. With the possibility that the Federal Reserve will continue to lower rates this fall, the 30-year Treasury bond has fallen to a paltry 2.10% coupon. Pretty small for committing capital to an investment for 30 years.
The problem for many income investors is they need higher yields but can’t risk buying junk bonds or highly leveraged closed-end and exchange-traded funds. The answer may be to look back to blue chip income stocks, as some of the top stocks that have paid consistent, dependable long-term dividends have been hammered.
We screened our 24/7 Wall St. research database and found five companies that all pay at least a 6% dividend and offer a reasonable degree of safety. While not intended to replace guaranteed issues like Treasury bonds or certificates of deposit, they make sense for those who have a slightly higher risk tolerance.
AbbVie
This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
AbbVie shareholders receive a rich 6.50% dividend. The Wall Street consensus price target for the shares is $85.25. The stock closed trading on Friday at $65.97.
Altria
This maker of tobacco products offers value investors a great entry point now, and it took a hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro, one of the most valuable brands in the world.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs. The company also has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
In addition, the company raised its dividend last week for the stunning 54th time in the past 50 years.
Shareholders of Altria now receive an outstanding 7.24% dividend. The consensus price target is $57.67, and the stock was last seen trading at $46.84.
Ford
This venerable automotive giant remains a solid value play now, and demand could jump with a trade deal with China paving the way. Ford Motor Co. (NYSE: F) is one of the world’s largest vehicle producers, with over 6 million units manufactured and sold globally. The company has made significant progress executing on its One Ford plan and delivering best-in-class vehicles.
Ford also remains committed to positioning itself well within the evolving auto industry through balanced investments across electrification, autonomy and mobility services. Ford is among the car brands with the most loyal customers.
The company reported second-quarter net income of $148 million in the quarter, down from $1.07 billion in the same period in 2018. Ford also posted earnings per share that were higher than in the same quarter in 2018, but they fell short of the consensus Wall Street estimate.
Ford shareholders receive a 6.84% dividend. The posted consensus price target is $10.73, and shares closed on Friday at $8.77.
Occidental Petroleum
This energy company made huge news recently with a Warren Buffett backed purchase of Anadarko Petroleum. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals.
The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. Meanwhile, the chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
With the company’s rock solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.
The shares have underperformed since the Anadarko acquisition was announced, but the investment case anchored by yield has not changed. Further, the company’s bid, while higher than Chevron’s, stands to release substantially more value via asset sales and synergies.
Shareholders receive a 7.46% dividend. The $73.50 consensus target is well above the most recent close at $42.37 per share.
Schlumberger
This top oil services company is expected to benefit from increased global exploration and production spending. Schlumberger Ltd. (NYSE: SLB) is the world’s largest provider of services and equipment used in drilling, evaluation, completion, production and maintenance of oil and natural gas wells.
The company operates in the oilfield service markets through three groups: Reservoir Characterization, Drilling and Production. Reservoir Characterization Group consists of the principal technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services and Schlumberger Information Solutions.
Rising activity, backlog additions for integrated projects and the possibility that international pricing has bottomed and should improve the rest of 2019 should be supportive of improving earnings over the next few years.
The dividend yield is 6.24%, and the consensus price target is $53.68. The stock ended last week trading at $32.03.
Note that any or all of these companies could at some point cut their dividends. With that in mind, investors have a chance to buy blue chip sector leaders at discount pricing with huge dividend payouts. Even if a recovery in the share prices takes a while, the high dividends will make the wait much more tolerable.
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