High Yield Blue-Chip Dividend Stocks

6 Blue-Chip Stocks That Pay High Dividends

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

Sometimes I like to round up and review a few dividend stocks from my portfolio.  Why? To highlight them and discuss their investment merits.

Today’s little group of big dividend stocks represents blue-chip stocks with the highest dividends.

First we will talk about how to find these gems.

Second, how to evaluate them.

And finally, go through some of the dividend metrics for each one. Let’s dive in…

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

How To Find High Dividend Yield Blue-Chip Stocks

You can find blue-chip stocks with high dividends for your portfolio in a number of places. Here are just a few to consider…

Dividend Kings & Dividend Aristocrats Can Be High Yield Blue-Chip Dividend Stocks

Lists like the Dividend Aristocrats and the Dividend Kings are great sources.

Dividends Kings have increased their dividends annually for at least 50 years. While Dividend Aristocrats’ yearly dividend increases tally at least 25.

And don’t forget about the Dividend Achievers. 10 years of annual dividend increases should not be taken lightly.

These lists contain some of the best blue-chip dividend-paying stocks. And such stocks are great for earning a dividend income.

Simply Investing Report For High Yield Blue-Chip Dividend Stocks

Another resource is Simply Investing. Simply investing is an investment service. They provide high-quality dividend stock analysis and recommendations.

I subscribe to the Simply Investing report. It is not just a list of blue-chip stocks with dividends.

More than that, the report provides blue-chip dividend stock recommendations. It helps me find and assess the best blue-chip dividend stocks available each month.

You can read my review about the Simply Investing report here: Simply Investing report review.

Or, find out more direct from Simply Investing.

The Dividends Diversify Model Portfolio Has Plenty Of High Yield Blue-Chip Dividend Stocks

But for today, I did a screen on my model dividend stock portfolio.

I screened for the best blue-chip dividend-paying stocks with a dividend yield higher than 4%.  Then, I chose several for this post.

High Yield Blue-Chip Dividend Stocks For Todays Review

And the winners are:

• AbbVie
• AT&T
• Altria
• Dominion
• International Business Machines
• Realty Income

We will get to each one of these high yield dividend stock investment options in a moment. 

But first, let’s address a few related points when seeking the highest yield blue-chip stocks.

#1 What Are High Yield Blue-Chip Dividend Stocks?

What a blue-chip dividend stock is to me, may not be a blue-chip stock to you.  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. They are 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, at least among the top companies in its sector.

#2 How To Evaluate Blue Chip Stocks Paying Dividends?

Okay, we have identified a company whose stock is considered blue-chip. And, that company’s blue-chip stock pays a dividend. Great!

But hold on, those 2 things alone do not mean you or I should invest in it. Before I invest a penny, I run every high yield blue-chip dividend stock through my dividend stock screener.

This is what I look for. And, these are the questions I ask myself before investing in any blue-chip dividend stock.

A Blue-Chip Business

Business model: What does the company do? How do they make money?

Growth strategy: What are management’s plans to grow revenue, earnings and cash flow?

With Blue-Chip Dividend Metrics

Forward dividend yield: What is the company’s annual dividend per share divided by the current stock price? I prefer dividend yields in the 3%-5% range. But, I make exceptions to this rule.

Historical dividend growth: What is the percentage growth rate of the dividend per share? I look at the past 1, 3, 5 and 7 year periods.

Stated dividend policy: Does the company have a stated dividend policy?

Dividend payout ratio: What is the percentage of earnings and cash flow paid to investors in dividends?

Historical revenue trend: What is the revenue growth trend over the past 7 years?

Projected dividend growth: What is a reasonable estimate of future annual dividend growth? For the highest yield blue-chip stocks, I will accept a lower dividend growth rate. Say, 2%-4%.

Plus A Blue-Chip Financial Foundation

Credit rating: What is the company’s credit rating as reported by the big credit rating agencies. It should be an investment-grade score. Moody’s and S&P. are the two rating agencies I use.

Financial position: Based on debt as a percentage of shareholders’ equity does the company have a strong financial position? In contrast, does the company carry too much debt?

And A Final Check With Simply Investing

Finally, I check my Simply Investing Report to see how their service grades the stock.

Simply Investing’s analysis can stand alone too. But, I like to use it as a cross-check against my work.

You Say…That Is A Lot Of Work To Make Blue-Chip Dividend Stock Investments?

You might think that it is a lot of work to invest in a blue-chip dividend-paying stock? Well, it can be.

You can keep dividend investing simple. But, doing the work helps me sleep at night when the stock market is dropping as it has recently.

And we are not quite done. There is more…

#3 High Yield – Safe Dividend Stocks?

Here is an important question when building a dividend portfolio of 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. But, being conscious of dividend safety is a critical step to getting reliable and recurring dividends every month.

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 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 The Dividend Safety Of High Yield Blue-Chip Dividend Stocks

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 the high dividend blue-chip stocks in today’s review to be safe.  However, do your research.  And form your conclusions.

After all, it is your money. And dividend safety is very important when building a dividend income stream for passive income.

Even Blue-Chip Stocks With The Highest Dividends Have Risk

Any blue-chip stock with a high dividend yield has it 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 6 high yield blue-chip dividend stocks next.

High Dividend Stock #1: AbbVie (ABBV)

AbbVie was founded in 2013.  So, AbbVie is one of the newer high dividend yield blue-chip stocks.

It was formed through a spin-off by Abbott Labs. As a result, the company has over 100 years of history in the drug sector as part of Abbott.  Plus its time as a stand-alone company.

In pharmaceuticals, AbbVie targets specific and difficult to cure diseases.  They also use their core research & development expertise to advance science.

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

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

AbbVie Dividend Information

• Recent dividend yield – 6.5%
• 7-year dividend growth rate – 17%
• Dividend payout ratio – 60% of earnings
• Consecutive years of dividend increases – 8

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

High Dividend Stock #2: AT&T (T)

AT&T is next on my list of blue-chip stocks that pay high dividends. It 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. They have nearly 3 million global customers.

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

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

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

AT&T Dividend Information

• Recent dividend yield – 7.0%
• 7-year dividend growth rate – 2.1%
• Dividend payout ratio – 60% of cash flow
• Consecutive years of dividend increases – 36 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

The Simply Investing report currently considers AT&T undervalued. And AT&T meets 6 investment criteria out of possible 9.

Related: Investing in AT&T

High Dividend Stock #3: Altria (MO)

Altria has been a market leader in the U.S. tobacco industry for decades. It is another of my model portfolio’s blue-chip stocks with high dividends. And the company pays quarterly dividends starting in January of each year.

Altria’s 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.

They offer reduced health risks. Plus less social friction associated with cigarettes.  Most importantly, they may provide a sustainable business model for 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

These other business areas are significant. Altria is no longer a pure-play in the tobacco industry.

Altria Dividend Information

• Recent dividend yield – 9.2%
• 7-year dividend growth rate – 9.0%
• Dividend payout ratio – 88% of earnings
• 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?

High Dividend Stock #4: Dominion (D)

Dominion Energy is next on my list of high dividend yield blue-chip stocks.

It is one of the largest producers and transporters of energy in the United States utility sector.  They are headquartered in Richmond, Virginia. And 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.

Furthermore, the Gas Infrastructure Group distributes, transmits, and stores natural gas for homes and businesses.  Service territories include Ohio, the Southeastern United States, and the Rocky Mountain region. Recently management has announced their intent to exit this business.

Finally, the Power Generation Group manages the company’s 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 – 5.0%
• 7-year dividend growth rate – 7.6%
• Dividend payout ratio – 95%
• Consecutive years of dividend increases – 17

Where’s The Dividend Risk?

• High dividend payout ratio
• New expansion project cost overruns
• The regulatory environment

Unfortunately, the dividend risk has been realized. Management announced the dividend will be reduced. Cross Dominion off my blue-chip dividend stock list for now. I don’t like dividend cuts!

Related: Dominion Energy for dividend income and growth

High Dividend Stock #5: International Business Machines (IBM)

My basket of blue-chip high yield stocks includes International Business Machines.

IBM is a global leader in the technology sector.  They operate across broad areas of technology products and services.  Their products and services include:

• Hardware
• Software
• Infrastructure and technical support
• Consulting
• Cloud computing
• Artificial intelligence
• Blockchain

IBM’s products and services are very broad and deep.  In fact, they have been criticized for being too complicated with a lack of integration across strategies.  Clients can easily be overwhelmed by choice and complexity.

IBM Dividend Information

• Recent dividend yield – 5.7%
• 7-year dividend growth rate – 9.6%
• Dividend payout ratio – 60% of earnings
• Consecutive years of dividend increases – 24

Where’s The Dividend Risk?

• Declining revenue trend
• Lack of successful growth initiatives
• Increased risk due to the acquisition of Red Hat

The Simply Investing report currently considers IBM undervalued. And IBM meets 7 investment criteria out of possible 9.

Related: A deeper dive into the growth challenges at IBM

High Dividend Stock #6: Realty Income (O)

Last, but not least, here is one of the best blue-chip dividend stocks in my opinion. Who’s that? None other than “The Monthly Dividend Company”.

Realty Income is one of my favorite high yield dividend stocks. Why?  They pay dividends to shareholders each month.

In contrast, most US-based companies pay dividends quarterly.  And companies located outside the US usually pay dividends twice per year.

Realty Income makes money by owning and leasing commercial real estate. Their properties generate rental revenue from long-term net lease agreements.

Realty Income’s tenants are diversified. They have a large number of commercial tenants operating in nearly 50 different industries. They are located throughout the United States and Puerto Rico.

Many tenants are well-known like retail pharmacy operator, Walgreens. With properties that are generally freestanding buildings in prime locations with good access and visibility.

Other tenants include FedEx. And discount retail store operator, Walmart. To name just a few.

Realty Income Dividend Information

• Recent dividend yield – 5.4%
• 7-year dividend growth rate – 3.7%
• Dividend payout ratio – 85% of funds from operations
• Consecutive years of dividend increases – 27

Where’s The Dividend Risk?

• High dividend payout ratio
• Dependent on easy access to low-cost debt financing
• Exposed to brick and mortar retail clients

Related: All About The Monthly Dividend Company

That includes my review of 6 high dividend yield blue-chip stocks.

But before we wrap up, I want to add a couple of points about constructing a portfolio of the best blue-chip dividend stocks.

Building A Portfolio Of The Best Blue-Chip Dividend Stocks

Because of the investment risk of owning a single high yield blue-chip dividend stock, be sure to construct a diversified portfolio.

Here are a few points to consider. Or you can dig deeper into my article about dividend stock portfolio construction.

Consider non-US based stocks for the global investment diversification they provide.

Hold enough stocks. At least 5. However solid portfolio diversification would call for 20-25. Exchange-traded funds can provide instant diversification when starting out.

Invest in a variety of stock sectors and industries. For example, holding 20 electric utility stocks that pay high dividends does not provide for adequate diversification.

Rebalance periodically. Do not let any single stock have too large of an allocation in your portfolio.

Consider lower dividend yield stocks with higher dividend growth potential.

High Yield Blue-Chip Dividend Stocks – Article Summary

We have reviewed 6 high yield blue-chip dividend stocks. And, I discussed some other important investing tips too.

Our featured blue-chip stocks with high dividends were:

• AbbVie
• AT&T
• Altria
• Dominion
• IBM
• Realty Income

Each company operates in a different industry. They sell a wide range of products and services.

What do they have in common? They are all blue-chip stocks with high dividend yields.

And even with their high dividend yields, historical dividend growth has been strong.  They have averaged more than 8% annually over the past 7 years.

But with most areas in life, there is no such thing as a free lunch.  Each blue-chip stock carries with it specific business risks. And, future growth risks that can pose a threat to today’s high dividend yields.

Further Reading Related To The Best High Yield Blue-Chip Dividend Stocks

• Living off the dividends from blue-chip high yield stocks
• A beginning dividend investors success story
• 3 blue-chip Dividend King stocks for long term investors
• Investing in utility stocks through a Vanguard ETF
• UPS stock and dividend analysis

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

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