Updated on February 10th, 2021 by Bob Ciura

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1. The 10 Blue Chip Stocks With The Highest Dividend Yields. The 10 blue chip stocks with the highest dividend yields are analyzed in detail below. These stocks combine the safety that comes with being a blue chip (Dividend Risk Score of C or better), with high yields. MLPs are excluded from the list below, but REITs are included if they meet the.
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Spreadsheet data updated daily

In poker, the blue chips have the highest value. We don’t like the idea of using poker analogies for investing. Investing should be far removed from gambling.

With that said, the term “blue chip” has stuck for a select group of stocks….

So what are blue chip stocks?

Blue chip stocks are established, safe, dividend payers. They are often market leaders and tend to have a long history of paying rising dividends. Blue chip stocks tend to remain profitable even during recessions.

At Sure Dividend, we define Blue Chip stocks as companies that are members of 1 or more of the following 4 lists:

• Dividend Achievers (10+ years of rising dividends)
• Dividend Aristocrats (25+ years of rising dividends)
• Dividend Kings (50+ years of rising dividends)

You can download the complete list of all 260+ blue chip stocks (plus important financial metrics such as dividend yield, P/E ratios, and payout ratios) by clicking below:

Click here to download your Excel spreadsheet of all 260+ blue chip stocks, including metrics that matter like dividend yield and the price-to-earnings ratio.

In addition to the Excel spreadsheet above, this article covers our top 10 best blue chip stock buys today as ranked using expected total returns from the Sure Analysis Research Database.

Our top 10 best blue chip stock list excludes MLPs and REITs. We also cover the 10 highest-yielding blue chip stocks in this article, excluding MLPs.

The table of contents below allows for easy navigation.

Table of Contents

• The 10 Best Blue Chip Stocks Today
  #10: AT&T Inc. (T)
  #9: Ritchie Bros. Auctioneers (RBA)
  #8: Eagle Financial Services (EFSI)
  #7: Northrop Grumman (NOC)
  #6: Principal Financial Group (PFG)
  #5: Bristol-Myers Squibb (BMY)
  #4: Enterprise Bancorp Inc. (EBTC)
  #3: Perrigo Company plc (PRGO)
  #2: L3Harris Technologies (LHX)
  #1: Lockheed Martin (LMT)

• The 10 Blue Chip Stocks With The Highest Dividend Yields
  #10: National Retail Properties (NNN)
  #9: Weyco Group (WEYS)
  #8: Philip Morris International (PM)
  #7: PPL Corporation (PPL)
  #6: W.P. Carey (WPC)
  #5: Universal Corporation (UVV)
  #4: AT&T Inc. (T)
  #3: Enbridge Inc. (ENB)
  #2: Altria Group (MO)
  #1: ONEOK Inc. (OKE)

The spreadsheet and table above give the full list of blue chips. They are a good place to get ideas for your next high quality dividend growth stock investment…

Our top 10 favorite blue chip stocks are analyzed in detail below.

The 10 Best Blue Chip Buys Today

The 10 best blue chip stocks as ranked by expected total return from The Sure Analysis Research Database (excluding REITs and MLPs) are analyzed in detail below. In this section, stocks were further screened for satisfactory Dividend Risk score of ‘C’ or better.

#10: AT&T Inc. (T)

• Dividend History: 36 years of consecutive increases
• Dividend Yield: 7.0%

AT&T is the largest communications company in the world, operating in four distinct business units: AT&T Communications (providing mobile, broadband and video to 100 million U.S. consumers and 3 million businesses), WarnerMedia (including Turner, HBO and Warner Bros.), AT&T Latin America (offering pay-TV and wireless service to 11 countries) and Xandr (providing advertising).

On January 27th, 2021 AT&T reported Q4 and full-year 2020 results. For the quarter, the company generated $45.7 billion in revenue, down from $46.8 billion in Q4 2019, as the COVID-19 pandemic continues to weigh on results. Reported net income equaled a loss of -$13.9 billion or -$1.95 per share due to non-cash charges. On an adjusted basis, earnings-per-share equaled $0.75 compared to $0.89 in the year-ago quarter. The $0.75 figure does not adjust for -$0.08 in COVID-19 impacts.

Source: Investor Presentation

For the year AT&T generated $171.8 billion in revenue, down from $181.2 billion in 2019. The pandemic impacted revenue across all businesses particularly, WarnerMedia and domestic wireless service revenues. On an adjusted basis earnings-per-share equaled $3.18 for 2020, versus $3.57 in 2019. This figure does not adjust for -$0.43 in COVID-19 impacts. AT&T ended the quarter with a net debt-to-EBITDA ratio of 2.70x.

AT&T also provided a full year 2021 outlook. For this year, the company anticipates 1% revenue growth, adjusted earnings-per-share to be stable with 2020 and a dividend payout ratio in the high-50% range.

AT&T is a colossal business, but it is not a fast grower. From 2007 through 2019 AT&T grew earnings-per-share by 2.2% per year. While the company is picking up growth opportunities, notably in its recent acquisition of Time Warner, we recognize the premiums paid and the fact that the company’s legacy businesses are steady or declining. AT&T is optimistic about generating reasonable growth and the payout ratio had been falling, resulting in excess funds to divert toward paying down debt.

Two individual growth catalysts for AT&T are 5G rollout and its recently-launched HBO Max service. AT&T continues to expand 5G to more cities around the country. On June 29th, AT&T announced it had turned on 5G service to 28 additional markets. AT&T now provides access to 5G to parts of 355 U.S. markets, covering more than 120 million people.

On May 27th, AT&T launched streaming platform HBO Max. At the end of 2020, AT&T had 41 million combined HBO Max and HBO subscribers in the United States. The new platform is a critical step for AT&T to keep up in the streaming wars.

AT&T is optimistic about generating reasonable growth and the payout ratio had been falling, resulting in excess funds to divert toward paying down debt. With a long history of increasing dividends each year (AT&T is a Dividend Aristocrat) we expect the company’s dividend payout to remain secure, even in a recession. The combination of 3% expected EPS growth, dividends, and changes in valuation result in expected total returns of 12.4% per year.

#9: Ritchie Bros. Auctioneers (RBA)

• Dividend History: 16 years of consecutive increases
• Dividend Yield: 1.6%

Ritchie Bros. Auctioneers offers end-to-end solutions for buying and selling used heavy equipment, trucks, and other assets. The company’s primary selling channels include Ritchie Bros. Auctioneers, the world’s largest industrial auctioneer featuring online bidding; IronPlanet, an online marketplace with weekly auctions; and IronClad Assurance, which provides equipment condition certification. The company generates annual revenue of approximately $1.3 billion and is located in Canada.

On November 5th, 2020, Ritchie Bros. reported its Q3 2020 results for the period ending September 30th, 2020. For the quarter, revenue increased by 14%, to $331.5 million, primarily as a result of increased sales volumes in online auctions. GTV (Gross Transaction Value) increased by 22% to $1.3 billion, showcasing strong demand for the company’s intermediary online services. Earnings-per-share increased by 78% to $0.41 due to lower proportional expenses and lower interest expenses due to a reduction of its debt levels.

Company management sees potential for aggressive expansion in the years ahead, due to a large addressable market across its business.

Source: Investor Presentation

We expect earnings-per-share growth of 12% per year over the next five years. Growth will be derived partially from acquisitions. Last year, the company acquired Rouse Services, a privately held firm that provides data intelligence and performance benchmarking for approximately $275 million to further enhance its auctioning services.

Richie Bros. is the largest industrial-equipment auctioneer in the world, holding a significant competitive advantage due to its long-term expertise in the sector and the wide network effect of its online participants. We view this competitive advantage as a long-term earnings growth driver.

Shares currently yield 1.6%, which is roughly on-par with the S&P 500 Index average yield. The company has increased its dividend for 16 years in a row, including a most recent dividend increase of 10%. The stock appears overvalued, wiht a P/E ratio of 34. We estimate the combination of high EPS growth and dividends can still generate annual returns of 12.4% per year, even with a negative impact from a falling P/E multiple.

#8: Eagle Financial Services Inc. (EFSI)

• Dividend History: 34 years of consecutive increases
• Dividend Yield: 3.7%

Eagle Financial Services is the holding company for Bank of Clarke County. Eagle Financial Services serves retail and commercial customers and offers consumer, mortgage and commercial loans as well as other banking services. The company was founded in 1991 and is headquartered in Berryville, VA.

Eagle Financial Services reported its fourth-quarter and full-year results on January 29th. Last year was a strong one for Eagle Financial Services. Net income increased 14.5% for the year, due to net interest income growth and reduced interest expense on deposit accounts. Net interest income increased 14.1% in 2020. For the full year, earnings-per-share increased 14.1% from 2019.

We expect annual EPS growth of 5%-6% per year over the next five years. Loan growth will continue to be a growth catalyst, as will above-average interest margins. Loans increased by $192 million for 2020.

Eagle Financial Services has increased its dividend for over 30 consecutive years, an impressive dividend history given the company’s small size. With a market cap of just ~$100 million, investors should consider the risks of investing in such small stocks with low liquidity. That said, the company has been able to raise its dividend for three decades while the stock has an attractive 3.7% yield.

The combination of EPS growth, valuation expansion, and dividends leads to total expected returns of nearly 13% per year over the next five years.

#7: Northrop Grumman (NOC)

• Dividend History: 17 years of consecutive increases
• Dividend Yield: 1.9%

Northrop Grumman is one of the five largest U.S. aerospace and defense contractors based on revenue. The company reports four business segments: Aeronautics Systems (aircraft and UAVs), Mission Systems (radars, sensors and systems for surveillance and targeting), Defense Systems (information technology, sustainment and modernization, directed energy, tactical weapons),and Space Systems (missile defense, space systems, hypersonics and space launchers).

Northrop Grumman released excellent fourth-quarter and full-year financial results. For the fourth quarter, revenue increased 17% to $10.2 billion, while diluted adjusted earnings per share increased 16%. Revenue for Aeronautics Systems increased 24% for the quarter, due to higher volumes in restricted programs, E-2D, and Manned Aircraft. Revenue for Defense Systems rose 2% while Mission Systems increased 10%. Revenue for Space Systems increased 31% for the quarter.

For the year, total revenue increased 9% to $36.8 billion, while adjusted EPS increased 11.5% to $23.65 for the full year.

Source: Investor Presentation

The company won $52.9 billion in contracts in 2020, with a book-to-bill ratio of 1.4 and the total backlog increased 25% to $81.0 billion at year-end. Northrop Grumman is selling its IT Services business for $3.4 billion, which will be used for share buybacks and retiring debt. The company issued guidance of $35.1 billion to $35.5 billion in sales and $23.15 to $23.65 in EPS for 2021, accounting for the divestment.

The stock has a P/E ratio of 14.0, below our fair value estimate of 15.0. The stock also has a 2% dividend yield. Including 10% expected EPS growth, total returns are expected to reach 14.6% per year over the next five years.

#6: Principal Financial Group (PFG)

• Dividend History: 12 years of consecutive increases
• Dividend Yield: 4.1%

Principal Financial Group is a financial corporation that operates several businesses including insurance (primarily life insurance), investment management, retirement solutions, and asset management. Principal Financial Group reported its fourth-quarter earnings results on January 28th. Assets under management, or AUM, grew to $810 billion, partially due to rising equity markets which boosted Principal Financial’s equity AUM.

The company’s Retirement and Income Solutions business also performed well during the quarter.

Bluechip Direct

Source: Investor Presentation

Principal Financial Group generated earnings-per-share of $1.48 during the fourth quarter, up 5% compared to the same quarter last year.

For 2020, profits declined from 2019 based on the impact of the coronavirus pandemic, but there was not a steep decline in profitability. Earnings-per-share in 2021 will likely be up again, and current estimates forecast new record profits for the company during the current year.

Principal Financial Group recorded a highly compelling average annual earnings-per-share growth rate of 12% between 2008 and 2019. Growth was a bit uneven, though, as there were some years where profits declined. The company’s asset management business, where Principal Global Investors and Retirement & Income Solutions are the main components, has benefited from solid AUM growth. We expect 5% annual EPS growth over the next five years.

Shares trade for a 2021 P/E ratio of 8.8, based on expected EPS of $6.15 for 2021. Our fair value P/E estimate is a P/E ratio of 11. The combination of P/E expansion, EPS growth and dividends leads to expected returns of 12.1% per year.

#5: Bristol-Myers Squibb (BMY)

• Dividend History: 11 years of consecutive increases
• Dividend Yield: 3.3%

Bristol-Myers Squibb was created when Bristol-Myers and Squibb merged in 1989, but Bristol-Myers can trace its corporate beginnings back to 1887. Today this leading drug maker of cardiovascular and anti-cancer therapeutics has annual revenues of about $42 billion.

Source: Investor Presentation

The past year has seen the company transform itself, due to the $74 billion acquisition of Celgene, a peer pharmaceutical giant which derived almost two-thirds of its revenue from Revlimid, which treats multiple myeloma and other cancers.

Bristol-Myers announced fourth quarter and full-year results on 2/4/2021. For the quarter, revenue grew 39% to $11.1 billion, topping estimates by $329 million. The company reported a net earnings loss of $10 billion, or $4.45 per share, compared to a net loss of $1.1 billion, or $0.55 per share, in the prior year. Reported net earnings included significant charges related to recent acquisitions.

Meanwhile, adjusted earnings-per-share of $1.46 per share for the fourth quarter, grew 20% year-over-year. For the year, revenues grew 63% to $42.5 billion while adjusted EPS improved 37% to $6.44.

BMY has positive growth potential moving forward. Not only is the Celgene acquisition an immediate catalyst, the company’s strong pharmaceutical pipeline will fuel its future growth. For example, Revlimid sales increased 18% for the fourth quarter, while Eliquis, which prevents blood clots, reported sales growth of 12% due to high demand in the U.S. and internationally, offset by lower prices. Another growth product is Orencia, which treats rheumatoid arthritis, which grew revenue by 9%. We expect 3% annual earnings growth over the next five years for BMY.

Bristol-Myers raised its guidance for adjusted EPS to a range of $7.35 to $7.55 from $7.15 to $7.45 previously. The company’s recently announced $2 billion addition to its share repurchase is a positive catalyst for earnings-per-share growth.

Based on expected EPS of $7.45, shares of BMY trade for a forward P/E ratio of 8. Our fair value P/E estimate is a P/E of 13-14, which is more in-line with the pharmaceutical peer group. Lastly, BMY has a 3.3% dividend yield, leading to total expected returns of 13.6% per year over the next five years.

#4: Enterprise Bancorp Inc. (EBTC)

• Dividend History: 27 years of consecutive increases
• Dividend Yield: 2.7%

Enterprise Bancorp Inc. was formed in 1996 as the parent holding company of Enterprise Bank and Trust Company, referred to as Enterprise Bank. Enterprise has 26 full-service branches in the North Central region of Massachusetts and Southern New Hampshire.

The company’s primary business operation is gathering deposits from the general public and investing in commercial loans and investment securities. The Bank offers commercial, residential and consumer loan products, cash management services, electronic banking options, insurance services, as well as wealth management.

About half of the company’s loan portfolio is in commercial real estate and about a third is in commercial construction loans. Enterprise Bancorp has a market cap of ~$330 million and is an exceptionally managed bank, which has remained profitable in every single quarter since its formation.

In late January,Enterprise reported (1/28/21) financial results for the fourth quarter of fiscal 2020. In the quarter, the bank grew its net interest income 16% over the prior year’s quarter, primarily thanks to Paycheck Protection Program loans. As a result, Enterprise grew its earnings-per-share 11% over the prior year’s quarter, from $0.74 to $0.82.

For 2020, loan loss reserves increased by $11 million due to the pandemic but customer deposits grew 25% thanks to stimulus checks and the cash preservation of customers in response to the uncertainty caused by the pandemic. The strong performance of Enterprise and its recent 5.7% dividend hike are testaments to the high quality of this bank and its resilience to downturns.

The combination of EPS growth, valuation changes and dividends leads to total expected returns of 13.7% per year over the next five years.

#3: Perrigo plc (PRGO)

• Dividend History: 25 years of consecutive increases
• Dividend Yield: 2.0%

Perrigo’s history goes all the way back to 1887 when Luther Perrigo, the proprietor of a general store and apple-drying business, had the idea to package and distribute patented medicines and household items for country stores. Today, Perrigo operates in the healthcare sector as a manufacturer of over-the-counter consumer and pharmaceutical products.

Its Consumer Self-Care Americas segment is comprised of the U.S., Mexico and Canada consumer healthcare businesses. The Consumer Self-Care International segment includes branded consumer healthcare business primarily in Europe, but also Australia and Israel. The Prescription Pharmaceuticals refers to the U.S. prescription pharmaceuticals business.The company generates over $5 billion in annual revenue.

Perrigo reported earnings results for the third quarter on 11/4/2020. The company’s revenue grew 1.3% to $1.21 billion, but was $17.4 million lower than expected. Adjusted earnings-per-share of $0.93 was a 10.6% decrease from the previous year, but $0.07 better than expected.

Source: Investor Presentation

The Worldwide Consumer segment was higher by 3.6% to $1 billion, with organic growth of 1.6%. The Consumer Self-Care Americas business improved 7.3% to a record $664 million. This segment had 4% organic growth due to higher consumer demand in U.S.

E-commerce, where Perrigo has a higher percentage of market share, had strong growth as consumers shifted towards online purchasing in wake of the pandemic. For the year, Perrigo continues to expect organic growth of at least 3% and adjusted earnings-per-share in a range of $3.95 to $4.15.

The company has scaled back its pharmaceutical operations. Consumer health products now represent approximately 80% of total revenue. And, the company will spin-off its pharmaceutical segment to further focus on consumer products. Focusing on consumer products will add stability to Perrigo, but these products typically grow at a lower rate than pharmaceuticals. We expect 5% annual EPS growth going forward.

Shares appear undervalued, with a P/E ratio of ~12. This is below our fair value estimate of 15. The combination of valuation expansion, earnings growth, and the 2% dividend yield result in total expected returns of 13.7% per year.

#2: L3Harris Technologies (LHX)

• Dividend History: 20 years of consecutive increases
• Dividend Yield: 1.8%

L3Harris Technologies is the result of a 2019 merger between L3 Technologies and Harris Corporation which formed the sixth-largest defense contractor. The company now reports four business segments: Integrated Mission Systems, Communication Systems, Space and Airborne Systems, and Aviation Systems. The majority of the L3Harris’ sales are to the U.S. Government or to other defense contractors.

L3Harris reported fourth-quarter and full-year results on January 29th. Quarterly revenue declined 3.6% to $4.66 billion, while adjusted EPS increased 10% to $3.14 from $2.85 (pro forma prior-year) due to merger synergies. For the full-year, revenue increased 0.5% to $18.2 billion while adjusted EPS increased 13% for 2020.

Source: Investor Presentation

While revenue was negatively impacted by the coronavirus pandemic in 2020, the company expects a snap-back in 2021. The company guided for 3.0% to 5.0% organic revenue growth for 2021, along with earnings-per-share of $12.60 to $13.00 in 2021. We expect 10% annual EPS growth over the next five years, comprised of revenue growth and share repurchases.

As a large defense contractor, L3Harris has competitive advantages related to defense contracting. The company develops and manufactures complex and bespoke systems for the Department of Defense. Notably, L3Harris is the market leader in tactical communications. Furthermore, L3Harris has built long-term relationships with both the DoD and prime contractors in its areas of expertise. These attributes make it somewhat recession-resistant.

Shares appear undervalued, with a P/E ratio of ~15 which is below our fair value estimate of 16. We also expect 10% annual EPS growth, and the stock has a 1.8% dividend yield. Putting it all together, we expect total returns of 13.9% per year.

#1: Lockheed Martin (LMT)

• Dividend History: 18 years of consecutive increases
• Dividend Yield: 3.0%

Lockheed Martin is the world’s largest defense company. About 60% of the company’s revenue comes from the U.S. Department of Defense, with other U.S. government agencies (10%) and international clients (30%) making up the remainder.

The company consists of four business segments: Aeronautics, which produces military aircraft like the F-35, F-22, F-16and C-130; Rotary and Mission Systems which houses combat ships, naval electronics and helicopters; Missiles and Fire Control which creates missile defense systems; and Space Systems which produces satellites.

Lockheed Martin reported another year of growth in 2020. For the fourth quarter, company-wide net sales increased 7% to $17 billion, while earnings-per-share increased 21%. All four business segments again increased net sales. For the year, company-wide net sales increased 9% to a record $65.4 billion while diluted GAAP earnings per share increased 12% to a record $24.50 per share.

Source: Investor Presentation

Lockheed Martin’s backlog is approximately $147.13 billion, driven by increases in Aeronautics, Missiles and Fire Control, and Rotary and Mission Systems, offset by a decline in Space. The company’s outlook for 2021 provides from revenue of at least $67.1 billion and diluted earnings per share of at least $26.00 per share.

Lockheed Martin is an entrenched military prime contractor. It produces aircraft and other platforms that serve as the backbone for the U.S. military and other militaries around the world. This leads to a competitive advantage as any new technologies would have to significantly outperform extant platforms. These platforms have decades-long life cycles and Lockheed Martin has expertise and experience to perform sustainment and modernization.

The combination of P/E expansion, 10% expected EPS growth and the 3.0% dividend yield to generate 15.0% annualized total returns over the next five years.

The 10 Blue Chip Stocks With The Highest Dividend Yields

The 10 blue chip stocks with the highest dividend yields are analyzed in detail below. These stocks combine the safety that comes with being a blue chip (Dividend Risk Score of C or better), with high yields. MLPs are excluded from the list below, but REITs are included if they meet the criteria. Stocks are ranked by dividend yield.

#10: National Retail Properties (NNN)

• Dividend History: 30 years of consecutive increases
• Dividend Yield: 5.0%

National Retail Properties is a REIT that owns ~3,000 single-tenant, net-leased retail properties across the United States. It is focused on retail customers because they are much more likely to accept rent hikes in order to avoid switching locations and losing their customer base. Thanks to this strategy, National Retail has offered consistent growth with markedly low volatility. It is also characterized by very high occupancy rates; its 15-year low occupancy rate is 96%,while its current rate is 98.8%.

The company has a large and diversified portfolio of tenants.

Source: Investor Presentation

National Retail has increased its dividend for 30 consecutive years (a record matched by only three publicly-traded REITs), making it a member of the Dividend Champions.

National Retail reported Q3 earnings on 11/2/20. FFO-per-share came in at $0.62, missing the average analyst estimate of $0.66 per share and falling from $0.70 in the year-ago quarter. Revenue came in at $158.6 million, a decline from $168.2M in the year-ago quarter. Portfolio occupancy stood at 98.4% as of quarter end compared to 98.7% in June and 98.8% in March.

The trust reported that it had collected ~90% of rent due for the quarter and ~94% of rent originally due in October. It also entered rent deferral lease amendments with tenants representing ~6% of annual rent originally due for the year. On average, 2.7 months of rent was deferred, ~77% of the deferred rent originally due in Q2 and 23% originally due in Q3. Meanwhile, Q3 operating expenses of $70.9M fell from $74.5M in the same year-ago period.

National Retail Properties has a high dividend yield of 5.0%, and the company has increased its dividend for 30 consecutive years. National Retail’s payout ratio is being maintained under three-quarters of FFO, and we believe it will stay there for the foreseeable future. Given this, the dividend is fairly safe at this point with the trust’s rising earnings. With a projected dividend payout ratio of 79% for 2020, the dividend appears secure.

#9: Weyco Group (WEYS)

• Dividend History: 38 years of consecutive increases
• Dividend Yield: 5.1%

Weyco Group Inc. designs and distributes footwear. Weyco’s brand portfolio consists of Florsheim, Nunn Bush, Stacy Adams, BOGS, and Rafters. The company sells its products wholesale mainly through department stores and national shoe chains in the U.S. and Canada. It also operates Florsheim retail stores in the U.S. and sells directly through online sales. The company owns Florsheim Australia that operates in Australia, South Africa and Asia Pacific, and it also owns Florsheim Europe. Weyco also licenses its brands in the U.S. and Mexico.

In the 2020 third quarter, Weyco Group reported company-wide net sales fell to $16.7M from $60.5M in the same quarter a year ago. The company reported a loss of $0.91 per share, down from a profit of $0.15 per share on year-over-year basis. The decline in sales and earnings was due to the impact of COVID-19 and also partly to JCPenney’s bankruptcy. In the U.S. and other countries around the world, government mandated shutdowns and restrictions resulted in store closures.

Bluechip Direct Advance 2300/4600

Weyco Group’s earnings have been impacted by the rise of e-commerce, and internet sales in the past decade. Many department stores and national shoe chains have suffered from declining sales and some have declared bankruptcy. The company is building distribution in new sales channels and now runs its own e-commerce platforms. That said, the company is still dependent on the wholesale channel and department stores for the great majority of its revenue. 2020 will be a difficult year, and it is likely that recovery will be slow.

Weyco’s main competitive advantage is the strength of its brands. With that said, footwear is a highly competitive business, and as a relatively small player, Weyco does not possess economies of scale over its larger competitors. Furthermore, the wholesale shoe industry is in general decline due to the broader challenges facing bricks-and-mortar department stores and national shoe chains.

Unless Weyco can enter the e-commerce channel more aggressively, it will likely continue to struggle in generating significant sales and earnings growth. The company is not recession resistant. Earnings per share declined during the last recession and took several years to recover.

The best aspect of Weyco Group stock is the high dividend, currently yielding above 5%. However, with a 2020 dividend payout ratio estimated to exceed 90%, there is some danger that the dividend could be reduced if the company’s fundamentals do not recover in 2021.

#8:Philip Morris International (PM)

• Dividend History: 13 years of consecutive increases
• Dividend Yield: 5.4%

Philip Morris International is a tobacco company that came into being when its parent company Altria (MO) spun off its international operations. Philip Morris sells cigarettes under the Marlboro brand, among others, internationally. Its sister company Altria sells the Marlboro brand (among others) in the U.S.

On February 4th, 2021 Philip Morris reported Q4 and full year 2020 results. For the quarter the company generated net revenue of $7.44 billion, which was down -3.5% compared to Q4 2019. Shipment volume was down -8.2% collectively, with cigarette shipment volume down -11.7% and heated tobacco, a much smaller portion of the business, up 26.9%.

Adjusted earnings-per-share equaled $1.26 for the fourth quarter, versus $1.22 in Q4 2019. For the year, Philip Morris generated revenue of $28.69 billion, which was down -3.7% compared to 2019. Shipment volume was down -8.1% collectively, with cigarette volume down -11.1% and heated tobacco up 27.6%. Adjusted earnings-per-share equaled $5.17 compared to $5.19 in 2019. Philip Morris also provided a 2021 forecast, anticipating adjusted earnings-per-share between $5.90 and $6.00.

Philip Morris’ weak profit growth over the last couple of years was partially due to the company’s investments into the iQOS/Heatsticks technology. Heated units have generated strong growth for the company in recent periods.

Source: Investor Presentation

The investment in the development of this device and the manufacturing equipment needed to produce this reduced-risk product on a massive scale were costly, but Philip Morris is hoping that those investments will pay off in the long run. Ramp-up of iQOS in international markets has taken hold and the product is one of the reasons why Philip Morris has been able to stabilize its business.

Philip Morris’ dividend payout ratio has never been especially low, and the ratio increased further during the last decade. At the peak, Philip Morris has paid out more than 90% of its net profits to its owners and this year could approach 100% depending on business conditions.

Due to strong cash generation, low capex requirements and the stability of Philip Morris’ business model during recessions the dividend still appears to be relatively well-covered. Philip Morris has one of the most valuable cigarette brands in the world (Marlboro) and is a leader in the reduced-risk product segment with iQOS.

#7: PPL Corporation (PPL)

• Dividend History: 20 years of consecutive increases
• Dividend Yield: 5.8%

Pennsylvania Power & Light Company, or PPL, was started in 1920 and can trace its roots back to Thomas Edison. PPL Corporation distributes power to more than 10 million people in the U.S and the U.K. The company is the parent company of seven regulated utility companies and provides electricity to customers in the U.K., Pennsylvania, Kentucky, Virginia and Tennessee. PPL also delivers natural gas to customers in Kentucky.

Source: Investor Presentation

PPL announced third quarter earnings results on 11/5/2020. Adjusted earnings-per-share of $0.58 was 4.9% lower than the previous year. Revenue decreased 2.1% to $1.9 billion, which was $130 million lower than expected. Earnings from ongoing operations for the Pennsylvania regulated segment improved 6.3% due to returns on additional capital investments.

PPL stated that it remains on track to sell its U.K. segment, with a goal of announcing a transaction in the first half of 2021. PPL now expects earnings-per-share of $2.40 to $2.50 for 2020, compared with $2.40 to $2.60 previously.

We maintain our earnings-per-share forecast of 2% for PPL. This accounts for the company’s historical growth, as well as likely substantial share dilution. One reason that PPL shares have lost value while many utility companies have grown is the uncertainty about operations in the United Kingdom. Investors have feared that regulators would reduce the allowed return on equity for electric companies starting in 2023.

After announcing a 0.6% increase for the 4/1/2020 payment, PPL has now increased its dividend for the past 20 years. With an estimated payout ratio of 68%, the dividend appears secure.

#6: W.P. Carey (WPC)

• Dividend History: 12 years of consecutive increases
• Dividend Yield: 6.0%

W.P. Carey is a commercial real estate focused REIT that operates two segments: real estate ownership and investment management. The REIT operates more than 1,200 single tenant properties on a net lease basis, across the US and Northern and Western Europe.

W.P. Carey has a highly diversified real estate property portfolio across multiple various industry groups.

Source: Investor Presentation

W. P. Carey reported its third-quarter earnings results on October 30th. Revenues totaled $300 million, down 2% year-over-year. Funds-from-operation, or FFO, increased 3% on a per-share basis to $1.15 for the quarter. W.P. Carey benefited from 99% rent collection in October, fueling hopes that the worst is behind it.

W. P. Carey also reinstated its guidance for 2020, now forecasting FFO-per-share in a range of $4.65 to $4.75. Importantly, this should be sufficient to fully cover the annualized dividend payout of $4.18 per share.

W. P. Carey generated FFO-per-share growth of 6% annually between 2009 and 2019, which is a very solid growth rate for a real estate investment trust, as these usually are low-growth vehicles. W. P. Carey invests additional money into new properties continuously. Since 2012 the REIT invested more than $10 billion into new assets by either purchasing entire REITs or through single-asset/portfolio purchases. W.P. Carey can access debt markets at favorable rates, which lowers the trust’s cost of capital, which then allows for improved investment spreads.

W. P. Carey has grown its dividend very regularly during the last decade. There has not been a dividend cut or dividend freeze during that time frame. The dividend payout ratio is high, as the REIT is paying out more than 80% of its funds from operations via dividends right now. We still believe that the dividend is sustainable, especially as W. P. Carey did not have any problems financing its dividend during the previous recessions.

#5:Universal Corporation (UVV)

• Dividend History: 50 years of consecutive increases
• Dividend Yield: 6.1%

Universal Corporation is the world’s largest leaf tobacco exporter and importer. The company is the wholesale purchaser and processor of tobacco that operates between farms and the companies that manufacture cigarettes, pipe tobacco, and cigars.

Source: Investor Presentation

Universal recently increased its dividend for the 50th consecutive year, meaning it now qualifies for the exclusive list of Dividend Kings.

Universal Corporation recently reported its fiscal 2021 third-quarter results. Adjusted earnings-per-share grew 7.5% over the first three quarters combined, compared with the same nine-month period the previous year.

In fiscal 2020, profits were down due to the impact of lower sales, coupled with some margin pressures on Universal’s operations. However, the company generated adjusted earnings-per-share of $3.49 during fiscal 2020, which allowed it to raise its dividend for the 50th consecutive year.

Still, Universal needs to find avenues for future growth. The company believes it has found an avenue for future growth in the form of acquisitions to diversify its business model.

Last year, Universal acquired FruitSmart, an independent specialty fruit and vegetable ingredient processor. FruitSmart supplies a juices, concentrates, blends, purees, fibers, seed and seed powders, and other products to food, beverage and flavor companies around the world.

More recently, on October 1st Universal announced the acquisition of Silva International, a privately-held dehydrated vegetable, fruit, and herb processing company. Silva procures over 60 types of dehydrated vegetables, fruits, and herbs from over 20 countries around the world.

Universal’s profits generated in fiscal 2020 sufficiently covered the forward dividend payout of $3.08 per share. The company also recently declared a $100 million share buyback (equal to roughly 8% of the current market cap) which will help ease the financial burden of the dividend by reducing the number of shares outstanding.

Investors will need to continue monitoring the company’s results to make sure its financial results do not deteriorate further, but for the time being the dividend appears covered.

#4: AT&T Inc. (T)

• Dividend History: 36 years of consecutive increases
• Dividend Yield: 7.0%

AT&T is already analyzed in the first section of this article.

#3: Enbridge Inc. (ENB)

• Dividend History: 26 years of consecutive increases
• Dividend Yield: 7.2%

Enbridge is an oil & gas company that operates the following segments: Liquids Pipelines, Gas Distributions, Energy Services, Gas Transmission & Midstream, and Green Power & Transmission. Enbridge made a major acquisition in 2016 by acquiring Spectra Energy for $28 billion. Enbridge was founded in 1949 and is headquartered in Calgary, Canada.

Note: As a Canadian stock, a 15% dividend tax will be imposed on US investors investing in the company outside of a retirement account. See our guide on Canadian taxes for US investors here.

Enbridge reported its third-quarter earnings results which showed resilience in the face of an extremely challenging operating environment. Adjusted EBITDA fell 3.6% for the quarter, while distributable cash flow declined just 0.8% year-over-year.

Enbridge has a recession-resistant business model, thanks in large part to its diversified and high-quality sources of cash flow.

Source: Investor Presentation

Enbridge produced extremely consistent cash-flow-per-share growth from 2009 to 2016, reporting positive growth every year, at a compelling growth rate of 10% annually. Cash flows declined during 2017, primarily due to the takeover of Spectra Energy, which increased Enbridge’s cash flows, but which was dilutive in the first year due to the high number of new shares being issued.

We expect 5% annual cash flow per share growth for Enbridge over the next five years, due primarily to new projects. Enbridge put more than $10 billion worth of projects into service during the last two years, and more growth projects are under construction. Enbridge’s strong results during 2019 in EBITDA, net earnings, and distributable cash flows, bode well for the future, although 2020 will be a lower-growth year according to management.

Enbridge is one of the largest pipeline operators in North America. Its vast asset footprint serves as a tremendous competitive advantage, as it would take many billions of dollars of investments from new market entrants if they wanted to be able to compete with Enbridge.

On December 8th, Enbridge raised its 2021 guidance, now expecting DCF-per-share in a range of C$4.70 to C$5.00 (equal to $3.67 to $3.90 in USD). The company also raised its dividend by ~3%.

#2: Altria Group (MO)

• Dividend History: 51 years of consecutive increases
• Dividend Yield: 7.7%

Altria Group is a consumer products giant. Its core tobacco business holds the flagship Marlboro cigarette brand. Altria also has non-smokable brands Skoal and Copenhagen chewing tobacco, Ste. Michelle wine, and owns a 10% investment stake in global beer giant Anheuser Busch Inbev (BUD).

Related: The 6 Best Tobacco Stocks Now, Ranked In Order

Altria is a legendary dividend stock, because of its impressive history of steady increases. Altria has raised its dividend for 51 consecutive years, placing it on the very exclusive list of Dividend Kings.

On January 28th, Altria reported financial results for the fourth quarter and full year. Revenue (net of excise taxes) of $5.05 billion increased 5.3% year-over-year. Cigarette volumes surprisingly increased 3.1% for the quarter, reversing many quarters of volume declines. Adjusted earnings-per-share declined 2% for the fourth quarter.

Source: Investor Presentation

For the full year, revenue net of excise taxes increased 5.3% to $20.84 billion, while adjusted earnings-per-share increased 3.6% to $4.36 for 2020. For 2021, Altria expects adjusted diluted EPS in a range of $4.49 to $4.62, representing a growth rate of 3% to 6% from 2020.

Altria’s key challenge going forward will be to generate growth in an era of falling smoking rates. Consumers are increasingly giving up traditional cigarettes, which on the surface poses an existential threat to tobacco manufacturers.

For this reason, Altria has made significant investments in new categories, highlighted by the $13 billion purchase of a 35% stake in e-vapor giant JUUL. This acquisition gives Altria exposure to a high-growth category that is actively contributing to the decline in traditional cigarettes.

These investments could provide Altria much-needed growth as the cigarette market steadily declines. It has also invested in its own heated tobacco product line called IQOS and Marlboro HeatSticks, which the company continued to expand in 2020.

Altria also recently announced a $1.8 billion investment in Canadian marijuana producer Cronos Group. Altria purchased a 45% equity stake in the company, as well as a warrant to acquire an additional 10% ownership interest in Cronos Group at a price of C$19.00 per share, exercisable over four years from the closing date.

Altria is also highly resistant to recessions. Cigarette and alcohol sales fare very well during recessions, which keeps Altria’s strong profitability and dividend growth intact. With a target dividend payout of 80% of annual adjusted EPS, Altria’s dividend appears secure.

#1: ONEOK Inc. (OKE)

• Dividend History: 18 years of consecutive increases
• Dividend Yield: 8.3%

ONEOK is an energy company that engages in the gathering and processing of natural gas, as well as a natural gas liquids business and natural gas pipelines (interstate and intrastate). ONEOK also owns storage facilities for natural gas.

ONEOK reported its third-quarter earnings results on October 27. The company reported that it generated revenues of $1.85 billion during the quarter, which was 5% less than the revenues that ONEOK generated during the previous year’s quarter.

Despite a revenue decline compared to the prior year’s quarter,which can be explained by commodity price movements, ONEOK managed to remain quite profitable, which can be explained by the fact that its input costs declined as well. During the most recent quarter, ONEOK generated adjusted EBITDA of $750 million, which was up 15% versus the previous year’s quarter, therefore easily outperforming the top line number.

Recovery in its natural gas liquids business has fueled ONEOK’s steady performance over the course of 2020.

Source: Investor Presentation

Distributable cash flows, which is operating cash flow minus maintenance capital expenditures, totaled $540 million during the quarter, up 12% on a year-over-year basis. Distributable cash flows came in at $1.21 on a per-share basis.

ONEOK sees 2020’s distributable cash flows declining slightly versus 2019, to ~$1.95 billion, or roughly $4.65 per share. ONEOK forecasts improving results going forward on a sequential basis. Still, DCF-per-share of $4.65 would cover the current annualized dividend payout of $3.74 per share.

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A key advantage for ONEOK is that a significant portion of its revenue, especially after the roll-up of its MLP, are fee-based or hedged, which makes the company less sensitive to commodity price swings. This is why ONEOK can operate with considerable leverage without being in dangerous territory, as its cash flows are not very cyclical.

The fee-based nature of ONEOK’s revenues and non-cyclical demand for natural gas, e.g. for heating, is what has made ONEOK recession-proof in the past. The combination of 3% projected DCF growth, dividends, and valuation changes lead to expected total returns of 12.5% per year through 2026.

Final Thoughts

Stocks with long histories of increasing dividends are often the best stocks to buy for long-term dividend growth and high total returns. But just because a company has maintained a long track record of dividend increases, does not necessarily mean it will continue to do so in the future. Investors need to individually assess a company’s fundamentals, particularly in times of economic distress.

While we view these stocks’ dividends as sustainable for now, based on guidance from management, conditions could continue to worsen. The coronavirus crisis that has caused the market meltdown over the past several weeks threatens to send the U.S. economy into a recession. With this in mind, investors should exercise caution when it comes to extreme high-yielders.

Click here to download your Excel spreadsheet of all 260+ blue chip stocks, including metrics that matter like dividend yield and the price-to-earnings ratio.

Christopher “Chip” Kuchevar, QPA, QKA, ChFC – President

chip@bluechiprps.com

Chip has been in the retirement plan and investment industry for nearly twenty two years. After obtaining his bachelor degree (mathematics and economics) from the University of Wisconsin – Madison in 1986, he jumped right in to the retirement plan world working for Northwestern Mutual Life. Following employee benefit positions with Mutual Service Insurance (Arden Hills, MN), First Banking Center (Burlington, WI), and Kolb Lauwasser & Co. (Elm Grove, WI) Chip saw the need for an independent TPA provider in Southeastern WI and started Blue Chip Retirement Plans, Inc. in 1999. Working in the banking, insurance company and CPA firm environments has provided Chip with a diverse background in the qualified retirement plan arena.
Chip is responsible for overseeing the overall marketing and communication strategy that is employed. His keen eye for identifying problematic plans with regard to design, testing and investment issues has made him a “go to” expert in this highly specialized market. Chip has obtained Qualified Pension Administrator (QPA) and Qualified 401(k) Administrator (QKA) designations from the American Society of Pension Professionals and Actuaries (ASPPA), along with obtaining a Chartered financial Consultant (ChFC) designation from the American College.

Lois Browning, – Vice President

lois@bluechiprps.com

Lois has over thirty years experience working in the retirement plan administration industry, of which, twenty years owning her own business until merging her company into Blue Chip in September 2019.

Theresa Driver, QKA – Compliance Consultant

theresa@bluechiprps.com

Theresa Driver has been with Blue Chip Retirement Plans, Inc. since 2005. Her twenty plus years of retirement plan experience includes employment with Bank One Trust Company, BenePlan, Inc., Emjay Corporation and Metavante Corporation. Theresa is a graduate of the University of Wisconsin – Whitewater with a degree in business. She is a member of ASPPA and has obtained the designation of Qualified 401(k) Administrator (QKA).

Christine Black – Compliance Consultant

christine@bluechiprps.com

Chris has been with Blue Chip Retirement Plans, Inc. since June 2009 as a Compliance Consultant. She specializes in the implementation and conversion of transfer plans for Blue Chip. Her sixteen years of experience has enabled her to be a plan document specialist. Previous experience includes similar positions with M&I Trust Company, Virchow Krause Employee Benefit Advisors and William Michaels, Ltd. Chris is a graduate of the University of Wisconsin – Oshkosh with a degree in Accounting.

Jacquelyn Cooper- Compliance Consultant

jackie@bluechiprps.com

Jackie joined Blue Chip Retirement Plans, Inc. in November 2011 as a Compliance Consultant. Her previous retirement plan administration experience of over fifteen years includes employment with Administrative Management Group, American Express Tax and Business Services and Lincoln Financial Group. Jackie earned a Bachelor of Science degree in Mathematics with an emphasis in Actuarial Studies from Indiana University.

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Gail Micheau, ERPA, QPA, CEBS – Compliance Consultant

gail@bluechiprps.com

Coming on board in July 2012, Gail brings with her twenty plus years of retirement plan administration experience primarily with one company, Verisight, Inc. (formerly RSM McGladrey / American Express TBS/Altschuler, Melvoin & Glasser). Her roles included co-managing over 125 plans, supervising and mentoring six associates and working with large complex plans. She also has worked fluently with the IRS and DOL correction programs: VCP, VFCP and DFVCP. Gail earned a Bachelor of arts degree from Lawrence University majoring in Economics and Spanish.

Kimberley Boyd -Compliance Consultant – ERPA, QPA

kim@bluechiprps.com

Kim has sixteen years of experience in retirement plan administration and compliance. She successfully earned her QKA and QPA and was one of the first in Mississippi to receive the ERPA designation. She has experience in all sizes and types of plans including ESOP plans, corrections through EPCRS, and ERISA regulations. Kim’s passion is retirement plan administration and her hands on approach and emphasis on customer service has earned her praises from clients and peers alike. Kim is a graduate of the University of Phoenix with a bachelor’s degree in Accounting.

Debbie Baze, QPA, QKA, TGPC – Compliance Consultant

debbie@bluechiprps.com

Debbie joins Blue Chip with seventeen years of experience in all aspects of retirement plan administration and compliance. She successfully earned her Qualified Pension Administrator (QPA), Qualified 401(k) Administrator (QKA) and Tax-Exempt & Governmental Plan Consultant (TGPC) designations through ASPPA. Debbie is also a member of The American Retirement Association and The National Tax-Deferred Savings Association. She has experience in all sizes and types of plans including PEO multiple employer plans and audit plans. Debbie is a graduate of the University of Oklahoma.

Andrea Peters – Distribution and Loan Processor

retire@bluechiprps.com

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Andrea has joined Blue Chip Retirement Plans, Inc. in October 2008. She is responsible for the processing of all distributions and loan requests, along with general client correspondence.