Size, history and dependable payouts never go out of style, which is why it always good thinking to have some high-dividend blue-chips stocks on your list of stocks to buy.
No, you’re not going to get the absolutely highest yields in the market with these names. You have to look at real estate investment trusts and master limited partnerships for those … but many of them don’t really qualify as blue chips when it comes to size, length of history and dependability of dividends.
For all those qualities and more, you have to add some boring defensive sectors to your search of high-yield blue chip stocks. Sure, you’re going to give up some dividend yield, but you’re also going to shed some risk. Large-cap telecommunications or healthcare stocks aren’t really known as fly-by-night operations.
A combination of defense and dividend yield is especially attractive these days. Stocks are hitting all-time highs, so of course you want to participate in that. Interest rates are near all-time lows, so generous dividend payers really make the income part of your equity-income portfolio shine. And there’s no telling when this market will correct (or worse), making blue chips with low volatility and other defensive characteristics a good place to be.
Here are five high-dividend, blue-chip stocks to buy for this nail-biting market:
High-Dividend Blue-Chip Stocks to Buy — Reynolds American (RAI)
RAI Stock Dividend Yield: 4.6%
Lots of folks won’t own tobacco stocks on principle, and that’s perfectly fine. That said, as much trouble as Reynolds American (RAI) has with slowing growth and lawsuits, it’s a heck of a defensive holding that has also been a huge outperformer throughout the bull market.
Between the hefty dividend yield of 4.6% and a beta of just 0.24, RAI stock is like a sea anchor when it comes to market volatility. Hey, if nothing else, tobacco stocks are good for ballast. At the same time, however, RAI stock is up more than 16% for the year-to-date, doubling the gain of the S&P 500. Furthermore, since the bear-market bottom of 2009, RAI stock has posted a total return of 380% vs. 230% for the S&P 500.
Besides, Reynolds American isn’t going away anytime soon. Should federal regulators approve its $27 billion acquisition of Lorillard (LO), RAI will have 33% market share, greatly closing the gap with Altria (MO) and its 50% share.
High-Dividend Blue-Chip Stocks to Buy — HCP (HCP)
HCP Stock Dividend Yield: 5.2%
HCP (HCP) is structured as a real estate investment trust, but focuses mainly on healthcare real estate including senior housing and medical offices. HCP has the mandate to deliver at least 90% of its taxable income back to shareholders in the form of dividends, which translates into a big dividend yield.
Those are payouts you can bank on. Indeed, HCP has paid uninterrupted dividends since 1985, landing it a place on InvestorPlace’s list of dependable dividend stocks. But HCP has been a great “what have you done for me lately” stock, too. Shares are up more than 16% for the year-to-date, clobbering the broader market by 8 percentage points.
Another thing about this stalwart, large-cap stock: Like RAI, it offers tremendous security in choppy markets. Indeed, the last time everything was crashing, HCP was rising. A domestic real estate trust just doesn’t have much exposure to the overseas geopolitical disasters that are making investors edgy.
High-Dividend Blue-Chip Stocks to Buy — AT&T (T)
AT&T Stock Dividend Yield: 5.2%
It’s harder to find a stock that’s more of a battleship than AT&T (T). The telecom giant has been paying uninterrupted dividends since 1984, landing it a place on InvestorPlace’s list of dependable dividend stocks. More interesting is what AT&T is up to on the M&A front.
The only news that matter these days about AT&T is its acquisition of DirecTV (DTV). The deal was necessary to fend off competition from Comcast’s (CMCSA) plan to acquire Time Warner Cable (TWC). But don’t worry about the dividend. A gusher of free cash flow makes is easy for T to make a nearly $50 billion acquisition and still pay out very high dividends.
Beefing up with DirectTV and the satellite provider’s exclusive Sunday Ticket deal with the NFL will go a long way toward bolstering AT&T’s hand in negotiations with content providers and advertisers.
High-Dividend Blue-Chip Stocks to Buy — CenturyLink (CTL)
CTL Stock Dividend Yield: 5.3%
That’s not true of CenturyLink anymore. CTL stock was yielding a crazy-high 7% at the beginning of the year, but then shares went on a price-appreciation tear. CTL stock is up 30% for the year-to-date, bringing the dividend yield to still-generous but less eye-popping levels.
CenturyLink, which has been around for nearly 50 years, is actually the third-largest telco by lines served, but that’s also been a huge source of problems. There’s no growth in lines. Now, with the expansion of its gigabit broadband services and broadband TV, the telco is making up for lost revenue in the legacy business and then some.
High-Dividend Blue-Chip Stocks to Buy — R.R. Donnelley (RRD)
RRD Stock Dividend Yield: 6%
R.R. Donnelley (RRD) is about as old-school as they come. This printing giant has been around since Abraham Lincoln was in office. And although it has been battered relentlessly by technological changes for decades now, it’s still standing — and maybe even set to thrive.
Traditional printing isn’t going away, but RRD can’t stand pat, so it’s also developing the capabilities to print high-tech products like RFID tags, batteries and antennae. Work is still in the research and development phase, but if it pans out, maybe RRD will get a chance to play the disruptor for a change.
True, RRD stock is off 15% for the year-to-date, but shares do seem to have bottomed. RRD stock has gained 8% in just the last month. The 6% yield on the dividend is an eye-opener, and you know the company is good for it. RRD is on InvestorPlace’s list of dependable dividend stocks, having paid one without interruption since 1984.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.