The 10 Best Blue-Chip Dividend Stocks to Buy for Q4

Lock these stocks in a box and save them for your children

By Charles Sizemore, Principal of Sizemore Capital

Source: Fabian Blank via Unsplash

Cheap dividend stocks are hard to come by these days. Seven years of bull market combined with a global hunt for yield have left prices of the best dividend stocks a little on the pricey side. But that doesn’t mean that there aren’t some decent, dividend-paying blue-chip stocks out there for investors willing to look.

The 10 Best Blue-Chip Dividend Stocks to Buy for Q4In the age of cheap online trading, investing isn’t marriage —  it’s more like speed dating, only you’re not swapping cheesy one-liners with the 20 or stocks you’ve traded in the span of an hour.

But I like to think that the very best dividend stocks are those that you can hold until death do you part (though certainly for richer and not poorer). And if they’re really good, your heirs can hold them for life as well.

Today, I’m going to cover 10 of my favorite dividend stocks. The stocks on this list run the gamut of sectors and even countries and might not seem to have a lot in common at first glance. But all make taking care of their shareholders via the payment of a dividend a major priority, and all pay very reasonable yields.

The Best Blue-Chip Dividend Stocks to Buy: Enterprise Products (EPD)

Dividend Yield: 5.9%
Sector: Energy

I’ll start with one of the very best dividend stocks you can buy in the energy sector, Enterprise Products Partners L.P. (NYSE:EPD). The midstream oil and gas pipeline space has seen its share of carnage over the past two years, as many of EPD’s peers have proven to be case studies in how not to run a business.

Even the safest and most boring of sectors can become risky if you add enough debt into the mix … something that rival Kinder Morgan Inc (NYSE:KMI) learned the hard way when it had to slash its dividend last year.

But the more staid and conservative management of EPD kept its debt burden more reasonable and managed to sail through the energy downturn without missing a beat. In fact, EPD has raised its cash distribution to its unit holders every single quarter since 2004. Yes, for nearly 12 full years now, this stock has raised its payout four times per year.

At today’s prices, EPD yields a respectable 5.9%. That’s a very decent yield no matter what the Federal Reserve decides to do next. I have a hard time envisioning investment-grade bonds offering anything close to that payout any time soon. And as EPD has shown throughout its history, it will put a little more cash in your pocket with each passing quarter.

The Best Blue-Chip Dividend Stocks to Buy: Exxon Mobil (XOM)

Dividend Yield: 3.6%
Sector: Energy

Among the world’s energy supermajors, you’re not going to find a bluer blue chip than Exxon Mobil Corporation (NYSE:XOM). ExxonMobil has seen it all: Oil booms, oil busts, embargoes the advent of alternative energy … you name it. And XOM has seen it over the course of its life.

Through it all, the company has always found a way to turn a respectable profit and return a fair chunk of that profit to its shareholders. The company has raised its dividend every year since 1982 and today yields 3.6%.

While by no means a monster yield, XOM’s payout is large enough to make it one of the highest-yielding large companies in America.

I don’t know what the future holds for the price of crude oil. It would appear that abundant supply, particularly non conventional shale plays, will keep a lid on prices for a long time to come.

But this is a company that found a way to survive and prosper when crude oil traded at $10 per barrel, so I’m not particularly worried about it. XOM is a solid blue chip to buy on any dips.

The Best Blue-Chip Dividend Stocks to Buy: Apple (AAPL)

Dividend Yield: 2%
Sector: Technology

Next up is a stock that that doesn’t get the respect it deserves these days. I’m talking about consumer electronics leader Apple Inc. (NASDAQ:AAPL).

Apple was the growth darling of the 2000s. This is the company that made MP3 players a mainstream consumer product, invented the smartphone as we know it today, helped to pioneer mobile payments and has generally done more to change the way we live than any company of the past decade.

But along the way, investors got spoiled. They expected Apple to change the world … again … every year … like clockwork. That was never realistic. Apple has matured and consolidated its empire of the past decade, and it inevitably slowed down. It’s no longer the growth dynamo it was a few years ago, but it is one of the best dividend stocks of its generation. I expect to own for AAPL stock for a long time to come.

At 2%, Apple is not the highest-yielding dividend stock you’re going to find. But since initiating its dividend in 2012, the company has been a dividend-raising powerhouse, and management has made the dividend and stock buybacks a major priority.

Even if Apple never puts out another life-changing, revolutionary product, it’s iOS ecosystem and App Store will continue to generate a reliable income stream for the company. And at current prices, Apple is essentially priced as a no-growth company, so any growth surprises down the road should be seen as icing on the cake.

The Best Blue-Chip Dividend Stocks to Buy: Realty Income (O)

Dividend Yield: 3.5%
Sector: 3.5%

I almost didn’t include blue-chip retail real estate investment trust Realty Income Corp (NYSE:O). Don’t get me wrong, I consider Realty Income to be one of the very best dividend stocks in the entire history of the U.S. stock market.

It is perhaps the bluest of blue-chip stocks, and I myself have pledged never to sell my Realty Income shares. I intend to let them compound for the rest of my life and then pass them onto my sons. Its conservative mix of properties is something that would likely survive anything short of a zombie apocalypse.

The only problem with Realty Income is price. At today’s prices, we’re having to pay up for quality, and Realty Income yields a relatively modest 3.6%. So my recommendation here might be a little different. Rather than invest a large lump sum, it might make more sense to dollar-cost average your way into this position.

And naturally, reinvest your dividends. This company has raised its dividend for 76 consecutive quarters … and at an annual rate of just shy of 5% going all the back to 1994. So even if today’s yield is a little on the low side, you’re still likely to earn a respectable return over time.

The Best Blue-Chip Dividend Stocks to Buy: WP Carey (WPC)

Dividend Yield: 5.9%
Sector: Financial

Along the same lines, I recommend triple-net retail REIT W.P. Carey Inc. REIT (NYSE:WPC). Like Realty Income, WPC is a landlord with a pretty sweet gig.

Its properties are leased under what is called triple-net leases. That means the tenants are responsible for all taxes, maintenance and insurance. The landlord’s only responsibility is to cash the rent checks. Not bad work if you can find it!

Triple-net leases tend to be long-term in nature and generally have automatic rent escalators to keep the landlord — and you, the investor — one step ahead of inflation. They aren’t an express train to stock market riches, but are one of the most consistent and reliable long-term wealth builders I’ve ever seen. Triple-net REITS are the kinds of stocks that you can generally buy, stuff in a drawer and forget about for years at a time.

WPC has raised its dividend every year since going public in 1998 and yields a nice 5.9% at current prices. With nearly two decades of annual dividend hikes behind it, WPC has proven that it can operate in virtually any environment: booms, busts, interest rate hikes, interest rate decline … WPC has seen them all, and kept right on trucking.

The Best Blue-Chip Dividend Stocks to Buy: Vereit (VER)

Dividend Yield: 5.3%
Sector: Financial

My next recommendation might be a little controversial. As of today, Vereit Inc (NYSE:VER) may not quite deserve to be included in a list of the blue chip stocks.

After all, it was only a couple years ago that its predecessor company was embroiled in a nasty accounting scandal … one that still hangs over the company today. Just this past month, two executives were arrested for their role in the accounting mess.

But in the two years that have passed since the scandal broke, Vereit has evolved into a very different kind of company. The new management team runs a far more conservative operation, and the focus has been on reducing the REIT’s debt load and lowering its overall risk profile.

It may not be the sexy growth machine it was during the Schorsch era, but Vereit is now a company that I can confidently say will still be around 20 or 30 years from now. And due to its conservative property portfolio that consists mostly of high-traffic retail properties, I’m going to stretch it a little and include VER among the blue chips.

At current prices, Vereit yields 5.3%, and I expect the company to start raising its dividend fairly aggressively in the years ahead.

The Best Blue-Chip Dividend Stocks to Buy: Diageo (DEO)

Dividend Yield: 2.7%
Sector: Consumer Goods

If you think that planning a major energy drilling project requires confidence in the future, consider the confidence you have to have in building a new scotch distillery.

Your product cannot technically even be called “scotch” until you’ve properly aged it for at least three years. And even then, it’s not drinkable in polite company. That requires any least another nine years of aging … if not 19.

That’s a long time to wait to book a sale, which is why there aren’t a lot of scotch distilleries out there. It’s also one of the reasons why I consider Diageo plc (ADR) (NYSE:DEO) among the very best dividend stocks. Diageo is the world’s largest whisky distiller … and the largest maker of premium booze in general.

DEO has successfully navigated the fickle, constantly changing world of alcoholic beverages for decades. And barring the return of prohibition, I don’t see the company hitting any major rough patches any time soon.

Diageo is a British company, and there is certainly a fair bit of uncertainty regarding the Brexit, should it ever officially happen. But in my view, a Brexit would help Diageo more than hurt it, as most of its sales are outside of the UK. A weak British pound would be a boon to profits.

We’ll see what happens on that front. In the meantime, you pour yourself a cocktail with the Diageo product of your choice, and enjoy the nice 2.7% dividend yield.

The Best Blue-Chip Dividend Stocks to Buy: Vodafone (VOD)

Dividend Yield: 5.3%
Sector: Telecommunications

Britain is just loaded with blue chip dividend stocks these days, and another fine example is global telecom leader Vodafone Group Plc (ADR) (NASDAQ:VOD).

At current prices, Vodafone yields an attractive 5.3%, putting it about in line with its U.S. rival AT&T Inc. (NYSE:T). But what makes Vodafone so much more attractive to me is its international scope. Mobile phone service is a saturated market in developed markets like the U.S. and U.K. At this stage, substantially the entire adult, non-incarcerated population already owns a smartphone with a data plan.

But in the developed world, there is still room for growth. Smartphones are already ubiquitous in most middle-income countries, but even here there is room for growth as customers upgrade from cheap pre-paid plans to more lucrative post-paid contracts.

And Vodafone has one of the most geographically diverse client books of all major world telecom companies, with a particularly strong presence in Africa and South Asia. So, Vodafone should continue to be a dividend-paying machine for a long time to come.

The Best Blue-Chip Dividend Stocks to Buy: Telefonica (TEF)

Dividend Yield: 8.6%
Sector: Telecom

Along the same lines, we have Spanish telecom giant Telefonica S.A. (NYSE:TEF). Telefonica is a major competitor throughout Europe, but the far more interesting story is its presence in Latin America. Telefonica is the leading telecom and paid TV provider in most of South America.

Over the past few years, that hasn’t been a good thing. A political crisis in Brazil and slower growth throughout the region has really sapped investor enthusiasm for Telefonica, and continued economic malaise throughout most of Europe hasn’t helped much either. But at current prices, Telefonica yields a fat 8%, so we’re certainly being compensated to wait while the company navigates this rough patch.

If you believe in the long-term prospects of Latin America, then Telefonica is a stock you should want to own.

The Best Blue-Chip Dividend Stocks to Buy: Unilever (UL)

Dividend Yield: 2.9%
Sector: Consumer Goods

And finally, I’ll leave you with one of the world’s best consumer staples companies, British-Dutch conglomerate Unilever plc (ADR) (NYSE:UL).

Unilever owns the Lipton tea, Magnum ice cream and Axe body spray brands, among many others. And the majority of its revenues come from emerging markets.

Unilever certainly isn’t the highest-yielding dividend stock on this list, but at 2.9% it still beats the pants off of most non-junk bonds these days. Plus, Unilever has a long history of raising its dividend. The company has consistently raised its dividend every year since the mid-1990s. (Note: UL declares its dividend in euros, so you have to consider dividend growth in euros. When translated into dollars, the dividend can appear to fluctuate due to currency fluctuations.)

Unilever is one of the few companies that I can confidently say will still be around 20, 30 or even 100 years from now. Is product mix will no doubt look different, as the company is constantly adding or eliminating brands. But Unilever’s place as a leading food and personal care company is about as unassailable as I’ve ever seen.

Charles Sizemore is the principal of Sizemore Capital Management. As of this writing he was long O, VER, DEO, TEF, EPD, UL, AAPL, WPC, and KMI.

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