Many investors want reliable stocks in their portfolios. Companies that have a track record of increasing their dividend for many years, with lower volatility, are generally known as blue-chip stocks.
At the same time, above-average returns are highly sought after, as that allows investors to grow their wealth faster. Retirees might benefit from a higher living standard when their investment portfolios are generating strong returns.
In this article, we will showcase three companies that fit both lists. These three blue-chip stocks are also reliable dividend growth stocks with solid track records. Their total return outlook over the coming years is also better than that of the average stock.
Bank of Nova Scotia (BNS)
Bank of Nova Scotia (NYSE:BNS) is a major Canadian bank that belongs to the country’s “Big 4.” It trades on the New York Stock Exchange as well as on Canadian exchanges. The bank is primarily active in Canada but also operates in some foreign countries. This incudes the U.S., Mexico, some countries in Central and South America, and the Caribbean.
It offers a wide range of typical banking and financial services to its customers, including debit and credit cards, saving accounts, mortgages, loans, insurance, business lending, brokerage services, investment banking services such as advisory and capital markets services, and so on.
Due to headwinds for its wealth management business from declining equity markets, its profits were down slightly during the most recent quarter. Nevertheless, the company managed to grow its earnings per share (EPS) to a record level in 2022 overall, as EPS hit $6.26.
For the current year, another increase in profits looks likely. Rising interest rates should allow Bank of Nova Scotia to grow its net interest income, which should be more than enough to offset ongoing headwinds from tough equity and bond markets that negatively impact the bank’s wealth management business.
Bank of Nova Scotia has increased its dividend for 11 years in a row, making it a Dividend Achiever. We believe that there is a high chance that the bank will continue to increase its dividend over time. Based on current EPS estimates for this year, Bank of Nova Scotia will pay out a little less than half its net profit this year via dividends. That means that the dividend is pretty safe and that there is considerable room for further dividend increases.
With a dividend yield of 5.8%, forecasted longer-term EPS growth of 5% per year, and considerable multiple expansion potential, we believe that there is a high chance that Bank of Nova Scotia will deliver returns in the mid-teens range over the next five years.
Qualcomm (NASDAQ:QCOM) is a semiconductor company that operates with a fabless model. That means it designs, develops and markets chips, but production is outsourced to foundries such as Taiwan Semiconductor (NYSE:TSM).
This fabless model means that Qualcomm does not have to invest large amounts of cash for capital expenditures, which results in a high free-cash-flow conversion. This, in turn, means that Qualcomm has more flexibility when it comes to shareholder returns and acquisitions.
Qualcomm’s products consist of integrated circuits that are used in mobile devices to enable voice and data communication. Qualcomm also has a large patent portfolio that includes 3G, 4G and 5G tech. This generates high-margin royalty payments for the company that it can use for shareholder returns and investments in other areas.
Despite the fact that chip markets have become weaker in the recent past, Qualcomm has reported very strong results. In its most recent quarter, the company was able to grow its revenue by 22% year over year.
During fiscal 2023, however, Qualcomm may experience some headwinds from a weakening chip market and a potential recession. That is why EPS are forecasted to pull back this year. However, they will still be the second-highest ever, behind only the 2022 profit per share that set a new record.
Qualcomm has increased its dividend for 20 years in a row. Additionally, there is a lot of room for further dividend growth, as the dividend payout ratio is below 30%. This makes the dividend very safe and should allow Qualcomm to offer sizeable dividend increases for many years to come.
Between the dividend yield of 2.4%, forecasted EPS growth of 7%, and substantial tailwinds from multiple expansions, a mid-teens total return seems achievable.
Albemarle (NYSE:ALB) is a chemicals company that is the largest lithium producer in the world while also producing other products such as bromine. Lithium is used in many batteries. And battery demand has been growing for many years. They are used in smartphones and other mobile devices, but the largest growth driver recently has been electric vehicles (EVs).
EVs require a large amount of lithium. And sales for EVs have been growing quickly, even though most vehicles sold around the world are combustion-powered. Growing demand for lithium from EVs and other products has led to a sharp increase in lithium prices. This has made Albemarle’s sales and profits surge upwards.
During the most recent quarter, Albemarle generated sales of $2.1 billion. This was up by 150% year over year, thanks mostly to surging lithium revenues. Albemarle’s profits rose even faster in 2022 due to the impact of operating leverage. Additionally, it is forecasted that Albemarle will see its EPS hit an even higher level (and a new record) in 2023.
Albemarle has increased its dividend by 27 years in a row, making it a Dividend Aristocrat. The dividend yield isn’t high, at only 0.6%. However, the dividend growth has been solid, as the company doubled its dividend over the last decade. The payout ratio is very low, at well below 10%. Thus, there is an extremely small dividend-cut risk.
While the small dividend yield does not add a lot to Albemarle’s total return potential, the total return outlook over the coming five years is still strong. Between expected EPS growth of 7%-8% and sizeable multiple expansion tailwind potential, we believe that total returns could reach 15% per year.
On the date of publication, Bob Ciura did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.