High Yield Blue-Chip Dividend Stocks

The Dividends Diversify model portfolio holds some of my best high yield blue-chip dividend stocks.

From time to time, I like to round up a few of them that have are similar in some way.  And highlight them for readers.

So, I did a quick screen on the Dividends Deluxe stocks with dividends higher than 4%.  Then, I chose 4 high yield blue-chip dividend stocks to review today.

High Yield Blue Chip Dividend Stocks

And the winners are:

• AbbVie
• AT&T
• Altria
• Dominion

We will get to each one of these high yield dividend stocks in a moment.  But let’s address 2 related points first.

#1 What Are High Yield Blue Chip Dividend Stocks?

What a blue-chip stock is to me may not be a blue-chip stock to you.  As best I can tell, the definition of a blue-chip stock is subjective.

Here is what Investopedia calls a blue-chip stock:

A blue-chip stock is a huge company with an excellent reputation. These are typically large, well-established and financially sound companies that have operated for many years.  They have dependable earnings and often pay dividends to investors.

A blue-chip stock typically has a market capitalization in the billions.  And, is usually the market leader or among the top companies in its sector.

Related: Build your own blue-chip stock portfolio

#2 High Yield – Safe Dividend Stocks?

Here is a key question when investing in blue-chip stocks with high dividend yields.  Is the dividend is safe?

When I speak of dividend safety, I mean safe from a reduction in the foreseeable future.

Dividend safety is also subjective.  What is safe for me might not be safe for you.

And company management doesn’t make it easy to spot a potential dividend reduction.  Most management teams will defend their company’s dividend right up until the day before they reduce it.

So, it is up to us as investors to judge dividend safety.  And take only the investment risks we are comfortable with.

Assessing High Yield Blue-Chip Dividend Stock Safety

I look at several factors to form an opinion on dividend safety for the high yield blue chip dividend stocks that I own.

Those factors include:

• Dividend payout ratio
• Historical dividend track record
• Free cash flow generation
• Debt levels
• Credit ratings
• Business health

Based on my reviews, I judge the dividends of these 4 high dividend blue-chip stocks to be safe.  However, you should do your research.  And form your conclusions.  After all, it is your money.

Related: Judging safety when picking dividend stocks

Identifying High Yield Blue-Chip Dividend Stock Risk

Every blue-chip stock has a high dividend yield for a reason.

High dividend yields are usually a result of business risks, financial risks, slow growth prospects, or a combination of these factors.  So, I will offer my opinion on why each stock has a high dividend yield.

Let’s jump into each of the 4 high yield blue-chip dividend stocks next.

AbbVie (ABBV)

AbbVie was founded in 2013.  It was formed through a spin-off by Abbott Labs.

As a result, the company has over 100 years of history in the pharmaceutical sector as part of Abbott.  And also as a stand-alone company.

In the pharmaceutical market, AbbVie targets specific and difficult to cure diseases.  They also leverage their core research & development expertise to advance science.

AbbVie seeks better solutions for treating challenging diseases.  Specifically, they focus on developing drugs in the following therapeutic areas

• Immune system
• Cancer
• Nervous system & brain
• Viruses
• General medicine

AbbVie Dividend Information

• Recent dividend yield – 5.4%
• 6-year dividend growth rate – 18%
• Dividend payout ratio – 60%
• Consecutive years of dividend increases – 7

Where’s The Dividend Risk?

• A large share of profits come from 1 drug:  Humira.
• Uncertainty regarding the company’s research and development pipeline
• Risks and costs associated with acquiring Allergan

Related: A deep dive into AbbVie for your investing dollars

AT&T (T)

AT&T is a world leader in communications, media, entertainment, and technology.

The company consists of four business units:

AT&T Communications provides mobile, broadband, video and other communications services to U.S. based consumers and nearly 3 million companies globally.

WarnerMedia consists of WarnerMedia Entertainment, WarnerMedia News & Sports, and Warner Bros.

AT&T Latin America provides mobile services in Mexico to consumers and businesses plus Vrio’s pay-TV services across South America and the Caribbean.

Xandr provides marketers with advanced advertising solutions using insights from AT&T’s TV, mobile, and broadband services.  This is combined with the extensive ad inventory of WarnerMedia’s cable networks and AT&T’s pay-TV services.

AT&T Dividend Information

• Recent dividend yield – 5.4%
• 7-year dividend growth rate – 2.1%
• Dividend payout ratio – 70%
• Consecutive years of dividend increases – 35 years

Where’s The Dividend Risk?

• Slow growth
• Risks and costs associated with the DIRECTV and Time Warner acquisitions
• The business requires large amounts of cash for network maintenance and upgrades
• High dividend payout ratio

Related: Investing in AT&T

Altria (MO)

Altria has been a market leader in the U.S. tobacco industry for decades.

Their brands include:

• Philip Morris USA – the maker of Marlboro cigarettes
• U.S. Smokeless Tobacco Company – the maker of Copenhagen and Skoal
• John Middleton – manufacturer of Black & Mild cigars
• Nat Sherman – a premium cigarette and cigar business
• JUUL Labs – Part-ownership in the nation’s leading e-vapor company

However, Altria’s goal is to be the U.S. leader in authorized, non-combustible, reduced-risk products.

To do this, they have been concentrating on three alternative product platforms:

• Smokeless and other oral nicotine products
• E-Vapor
• Heat-not-burn tobacco products

Altria is trying to convert traditional smokers to these product lines.

Because they offer reduced health risks and less social friction associated with cigarettes.  Even more, they may provide a business model that is more sustainable in the future.

Altria’s product platform is complemented by:

• Ste. Michelle Wine, a collection of distinctive wine estates
• A significant investment in Anheuser-Busch InBev – the world’s largest brewer
• Part-ownership interest in a leading global cannabinoid company – Cronos Group

Because of the significance of these other business areas, Altria is no longer a pure-play in the tobacco industry.

Altria Dividend Information

• Recent dividend yield – 6.7%
• 7-year dividend growth rate – 9.8%
• Dividend payout ratio – 88%
• Consecutive years of dividend increases – 50

Where’s The Dividend Risk?

• A decline in the use of traditional tobacco products
• Litigation risks
• Uncertainty around new growth initiatives
• High dividend payout ratio

Related: Is an investment in Altria worth the risk?

Dominion (D)

Dominion Energy is one of the largest producers and transporters of energy in the United States utility sector.  Headquartered in Richmond, Virginia, they have nearly 7.5 million customers in 18 states. 

Assets are approaching $100 billion focused on:

• Electric generation, transmission, and distribution
• Natural gas storage, transmission, distribution, and import/export services
• Solar energy generation

Dominion has 3 primary operating segments.

First of all, the Power Delivery Group distributes electricity to North Carolina and Virginia.

The Gas Infrastructure Group distributes, transmits and stores natural gas to both residential and industrial customers.  Service territories include Ohio, the Southeastern United States, and the Rocky Mountain region.

Finally, the Power Generation Group manages the company’s fleet of power generating stations.  Power sources include renewables like water, wind and solar.  And more traditional power sources like nuclear, gas, coal and oil.

Dominion Dividend Information

• Recent dividend yield – 4.6%
• 7-year dividend growth rate – 7.8%
• Dividend payout ratio – 94%
• Consecutive years of dividend increases – 16

Where’s The Dividend Risk?

• High dividend payout ratio
• Atlantic Coast Pipeline project cost overruns

Related: Dominion Energy for dividend income and growth

High Dividend Blue-Chip Stocks – Article Summary

We reviewed the following 4 high yield blue-chip dividend stocks:

• AbbVie
• AT&T
• Altria
• Dominion

They operate in very different industries and sell a diverse range of products and services.  But, they all have high dividend yields greater than 4%.  Except for Dominion, they have dividend yields greater than 5%.

And even with such high dividend yields, historical dividend growth has been strong.  They have averaged almost 10% annually over the past 7 years across these 4 high yield blue-chip dividend stocks.

But with most things in life, there is no such thing as a free lunch.  Each carries with it specific business and future growth risks that underlie today’s high dividend yields.

Disclosure & Disclaimer

This article, or any of the articles referenced here, is not intended to be investment advice specific to your situation. I am not a licensed investment adviser, and I am not providing you with individual investment advice. The only purpose of this site is information & entertainment. We are not liable for any losses suffered by any party because of information published on this blog. See this site’s Disclaimer and Privacy tab for more information.

I own all of the high yield blue-chip dividend stocks mentioned in this article.