Investing

BofA Securities Says No Rate Cuts in 2025 - 5 Blue Chip Dividend Stocks Are Top Picks This Year

Lee Jackson

Published: January 12, 2025 4:47 pm

Investors love dividend stocks, especially the blue-chip variety, because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. Blue chip stocks are shares of large, well-established companies considered less risky and more financially stable than other stocks. They are often industry leaders with strong brand names and reputations and a history of consistent growth.

24/7 Wall St. Key Points:

• Many are thinking it, but BofA Securities said it: No rate cuts for 2025
• The economists at the bank cited the ” Straw that broke the camels back was the huge December jobs report”
• With interest rates seemingly set unless there is a market crash, blue chip dividend stocks make sense now
• Does your portfolio have the proper allocation of blue chip dividend stocks? Now’s the time to meet with a financial advisor near you for a portfolio check-up. Click here to get started finding the right one for you. (Sponsored)

If the team of economists at BofA Securities is correct and rate cuts are over, it could also mean the two-year raging bull market is over. With the S&P 500 up over 20% for 2023 and 2024, the first time that has happened since the late 1990s, and trading at an enormous price-to-earnings ratio of 24.59, which has dropped some to start the year, we could be in for a sizable correction at some point.

We screened the most recent BofA Securities U.S. 1 list of top stock picks to start 2025, and five blue-chip dividend giants look like great ideas for growth and income investors who are wary of an overbought stock market. All are, of course, rated Buy and have solid upside to the assigned price targets.

Why do we cover blue-chip dividend stocks?

Blue-Chip dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

Chevron

This integrated giant is a safer way for investors looking to position themselves in the energy sector. It pays a rich 4.26% dividend. Chevron Corporation (NYSE: CVX) engages in integrated energy and chemicals operations worldwide through its subsidiaries.

The company operates in two segments:

• Upstream
• Downstream

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines
• Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum product
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

Chevron announced in 2023 that it has entered into a definitive agreement with Hess Corporation (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share.

The transaction’s total enterprise value, including debt, is $60 billion. The Federal Trade Commission approved the deal last fall, and it should be completed by this summer.

Cisco

This legacy technology giant is close to reaching a 52-week high and offers a solid 2.75% dividend Cisco Systems, Inc. (NASDAQ: CSCO) designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry in:

• The Americas
• Europe
• The Middle East
• Africa
• The Asia Pacific
• Japan
• China

The company also offers a switching portfolio that encompasses campus switching as well as:

• Data center switching
• Enterprise routing portfolio interconnects public and private wireline and mobile networks, delivering highly secure and reliable connectivity to campus, data center, and branch networks
• Wireless products include wireless access points and controllers
• Compute portfolio including the Cisco unified computing system, hyperflex, and software management capabilities, which combine computing, networking, and storage infrastructure management and virtualization

In addition, it provides Internet for future products consisting of:

• Routed optical networking
• 5G
• Silicon and optics solutions
• Collaboration products, such as meetings, collaboration devices, calling, contact centers, and communication platforms as a service
• End-to-end security product consists of network security, cloud security, security endpoints, unified threat management, and zero trust
• Optimized application experience products, including full-stack observability and network assurance

Further, the company offers a range of service and support options for its customers, including technical support, advanced services, and advisory services. It serves businesses of various sizes, public institutions, governments, and service providers.

Mid-America Apartment Communities

With rents soaring, this is an ideal stock for growth and income investors, and it pays a hefty 4.10% dividend. Mid-America Apartment Communities, Inc. (NYSE: MAA) is a real estate investment trust (REIT) focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development, and redevelopment of quality apartment communities, primarily in the Southeast, Southwest, and Mid-Atlantic regions of the United States.

As of June 30, 2024, the company was interested in 103,614 apartment units across 16 states and the District of Columbia, including communities currently in development.

The company posted very strong third-quarter results, as core funds from operations exceeded Wall Street expectations, driven by better-than-forecasted same-store net operating income. In addition, record low resident turnover and substantial collections contributed positively to the quarter’s performance.

Mid-America Apartment Communities also reported early positive trends in new lease pricing, suggesting that the worst pricing pressures from new supply may be behind them.

Sempra

Like the entire sector, this utility has run hard but still offers a solid 3.15% dividend. Sempra (NYSE: SRE) operates as an energy infrastructure company in the United States and internationally.

It operates through three segments:

• Sempra California
• Sempra Texas Utilities
• Sempra Infrastructure

The Sempra California segment provides San Diego County electric and natural gas services. As of December 31, 2023, it offered electric services to approximately 3.6 million people and natural gas services to approximately 3.3 million people, covering 4,100 square miles.

This segment owns and operates a natural gas distribution, transmission, and storage system that supplies natural gas. As of December 31, 2023, it serves a population of 21 million, covering 24,000 square miles.

The Sempra Texas Utilities segment engages in regulated electricity transmission and distribution. As of December 31, 2023, its transmission system included:

• 18,298 circuit miles of transmission lines
• 1,257 transmission and distribution substations
• Interconnection to 173 third-party generation facilities totaling 54,277 MW
• The distribution system included approximately 4.0 million points of delivery and consisted of 125,116 miles of overhead and underground lines.

The Sempra Infrastructure segment develops, builds, operates, and invests in energy infrastructure to help enable the energy transition in North American markets and worldwide.

Wells Fargo

With a solid 2.30% dividend and many headline issues in the rearview mirror, this money-center giant makes sense now. Wells Fargo & Company (NYSE: WFC) is a financial services company that provides diversified banking, investment, mortgage, and consumer and commercial finance products and services in the United States and internationally.

The company operates through four segments:

• Consumer Banking and Lending
• Commercial Banking
• Corporate and Investment Banking
• Wealth and Investment Management

The Consumer Banking and Lending segment offers diversified financial products and services for consumers and small businesses. These include checking and savings accounts, credit and debit cards, and home, auto, personal, and small business lending services.

The Commercial Banking segment provides financial solutions to private, family-owned, and certain public companies. Its products and services include banking and credit products across various industry sectors and municipalities, secured lending and lease products, and treasury management services.

The Corporate and Investment Banking segment offers a suite of capital markets, banking, and financial products and services, such as:

• Corporate banking
• Investment banking
• Treasury management
• Commercial real estate lending and servicing
• Equity and fixed-income solutions
• Sales, trading, and research capabilities services to corporate, commercial real estate, government, and institutional clients

The Wealth and Investment Management segment provides wealth management, brokerage, financial planning, lending, private banking, and trust and fiduciary products and services to affluent, high-net-worth, and ultra-high-net-worth clients.

It also operates through financial advisors in brokerage and wealth offices, consumer bank branches, independent offices, and digitally through WellsTrade and Intuitive Investor.
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