Investors often seek rapid returns via investing in higher-risk, higher upside growth stocks. Indeed, that’s been a profitable trade for the better part of 15 years, with most growth stocks seeing outsized performance relative to their blue chip value stock peers. And with a rotation building out of many top names (including some blue chip stocks), the future for a wide range of companies remains uncertain. 

Macroeconomic conditions are softening, though the economy still appears to be strong. But with cracks showing in recent employment data, and the Federal Reserve signaling the intention to cut interest rates, certain blue chip value stocks that pay dividends could come into focus once again for investors.

Many may be enticed by the stability and strength of blue chip companies’ balance sheets. Others may prefer companies that are profitable, and return capital to shareholders via dividends and buybacks. The following three stocks on this list certainly meet these criteria, for investors looking to take a more cautious approach to the market.

Key Points About This Article:

• Blue chip stocks have certainly performed well, but not as well as many high-growth tech stocks over the past 15 years.
• However, a rotation appears to be building, in which many investors are eyeing blue chip stocks as core portfolio staples for the next phase of this market cycle.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

McDonald’s (MCD)

McDonald’s (NYSE:MCD) is a blue chip stock that really doesn’t need an introduction. For investors looking at fast food giants, this is the top name, and is expected to continue to be over the forecastable future. With a market capitalization around $200 billion, McDonald’s is massive, operating more than 40,000 locations in more than 100 countries. Importantly, around 95% of its restaurants are independently owned, meaning McDonald’s earns the vast majority of its revenue and net income from franchise fees and royalties. 

That’s a model that’s worked, with the company continuing to rely on scale and price increases in the past. Of course, prices have started to come down, leading the company to miss its Q2 earnings expectations. A 3% decreased in guest count and a decline in U.S. comparable sales led to EPS of just $2.97, versus the $3.08 analysts expected. Revenue also came in substantially below expectations at $6.5 billion for the quarter, well below the $6.7 billion forecast.

That said, the company’s recent decline may be a buying opportunity, as McDonald’s management team focuses on introducing new value offerings and getting consumers excited by its brand once again. So far, this strategy appears to be paying off, but we’ll have to see how future earnings reports come in.

I think McDonald’s world-class brand and its ability to capture the value-conscious consumer could be much more highly valued by the market if things deteriorate. Accordingly, with a 2.3% dividend yield paying investors to be patient, this is a blue chip stock I think is worth buying on these dips.

Walmart (WMT)

Walmart (NYSE:WMT) posted strong Q2 fiscal 2025 results, with strong year-over-year growth in both revenue and earnings allowing the company to exceed analyst estimates. These results led the company’s management to raise its fiscal 2025 guidance, a move that boosted shares immediately following the earnings report on August 15. 

Notably, Walmart saw strong growth across all segments, with e-commerce, store and club sales, and delivery services seeing strong performance. Importantly, new ventures such as the company’s focus on advertising, membership and marketplace also contributed to more broad success, and underscored the strength of Walmart’s business model.

I think as Walmart continues to expand its e-commerce footprint, and grows margins (which expanded by 43 basis points this past quarter), its pricing strategies and more diversified revenue mix should bode well for long-term investors. This is a blue chip stock paying a 1.1% dividend I think is worth picking up on dips moving forward.

PepsiCo (PEP)

PepsiCo (NASDAQ:PEP) is among the consumer discretionary brands that has seen challenges in growing its sales volume, resorting to price hikes to see revenue and earnings growth. That said, the undeniable pricing power Pepsi holds is remarkable, and is one of the key reason many long-term investors continue to hold and invest in this company on dips. 

Pepsi’s strong long-term growth profile is nicely accompanied by a 3.2% dividend yield which is the highest on this list, and among the most durable yields in the market. The company has increased dividends for 52 consecutive years, recently raising their distribution by 7%. Thus, if interest rates come down, I’d expect to see greater demand for long-term dividend growers like Pepsi, making the stock’s recent valuation even more attractive.

On a forward-looking basis, Pepsi’s management team expects 2024 sales to grow by 4% and EPS to increase by 8% (or higher). It’s clear that the consumer is becoming more price conscious, so it’s unclear if further price hikes will work in the coming quarters. But with a range of snack brands in additions to its beverages still holding strong margins, any sort of cost improvements could improve the company’s outlook moving forward. 

Over the long-term, I think Pepsi is one of those world-class brands that should continue to perform very well over the long-term, and is worth patiently holding as a core position in a well-diversified portfolio.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.