Updated on May 11th, 2021 by Bob Ciura
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 stocks” 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 3 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:
In addition to the Excel spreadsheet above, this article covers our top 7 best blue chip stock buys today as ranked using expected total returns from the Sure Analysis Research Database.
Our top 7 best blue chip stock list excludes MLPs and REITs. The table of contents below allows for easy navigation.
Table of Contents
- The 7 Best Blue Chip Stocks Today
- Blue Chip Stock #7: Becton, Dickinson and Company (BDX)
- Blue Chip Stock #6: Enbridge Inc. (ENB)
- Blue Chip Stock #5: Lockheed Martin (LMT)
- Blue Chip Stock #4: Merck & Co. (MRK)
- Blue Chip Stock #3: Comcast Corporation (CMCSA)
- Blue Chip Stock #2: Bristol-Myers Squibb (BMY)
- Blue Chip Stock #1: Perrigo Company (PRGO)
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…
The 7 Best Blue Chip Buys Today
The 7 best blue chip stocks as ranked by 5-year expected annual returns 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.
Blue Chip Stock #7: Becton, Dickinson and Company (BDX)
- Dividend History: 49 years of consecutive increases
- Dividend Yield: 1.4%
Becton, Dickinson & Co., or BD,is a global leader in the medical supply industry. The company was founded in 1897 and has over 70,000 employees across 190+ countries. The company generates around $17 billion in annual revenue, with approximately 43% of revenues coming from outside the U.S.
BDX has been very active on the acquisition front in recent years, and is now comprised of three segments.
Medical Division products include needles for drug delivery systems, and surgical blades. The Life Sciences division provides products for the collection and transportation of diagnostic specimens. The Intervention segment includes several of the products produced by what used to be Bard.
Source: Investor Presentation
On 2/4/2021, BDX released earnings results for the first quarter of fiscal year 2021. Revenue grew 25.8% to $5.32 billion, beating estimates by $450 million. Adjusted earnings-per-share of $4.55 was a 72% improvement from the prior year and $1.39 per-share better than expected. COVID-19 diagnostic revenues totaled $867 million and contributed 20.5% of the year-over-year growth. Each segment of the company had higher revenue than the prior year.
Medical segment revenue increased 6.9%, Pharmaceutical Systems grew nearly 10% while Medical Management Solutions revenue increased more than 8%. By geography, the U.S. improved 28.8%, international markets were up 18.2%, with developed nations growing by almost 29% and China up 2.2%. BDX also raised its guidance for fiscal 2021 and now expects adjusted EPS in the range of $12.75 to $12.85, up from $12.40 to $12.60 previously.
We feel that BDX can grow earnings at a rate of 10% per year through fiscal 2026 due to a combination of mid-single-digit organic sales growth, revenue gains due to the Bard acquisition, and future share repurchases.
With a P/E above 19 compared with our fair value estimate of 18.4, we see the stock as slightly overvalued. Still, the combination of 10% expected EPS growth and the 1.3% dividend yield lead to total expected returns of 10.9% per year over the next five years.
Blue Chip Stock #6: Enbridge Inc. (ENB)
- Dividend History: 26 years of consecutive increases
- Dividend Yield: 6.9%
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 is a large-cap stock with a market capitalization of ~$80 billion.
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 first-quarter results in early May. Distributable Cash Flow (DCF) of $1.37 per common share increased 2.2% from the same quarter last year. Separately, Enbridge reaffirmed its full-year guidance for 2021. The company expects EBITDA of $13.9 billion to $14.3 billion and DCF per share of $4.70 to $5.00 for the full year.
The company also expects steady growth through 2023.
Source: Investor Presentation
We expect 4.5% annual cash flow per share growth for Enbridge over the next five years, due primarily to new projects. 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, the company also raised its dividend by ~3%. Shares currently yield 6.9%. The combination of dividends, DCF-per-share growth, and an expanding valuation multiple could lead to total annual returns of 11.2% per year over the next five years.
Blue Chip Stock #5: Lockheed Martin (LMT)
- Dividend History: 18 years of consecutive increases
- Dividend Yield: 2.7%
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 (~40% of sales) which produces military aircraft like the F-35, F-22, F-16and C-130; Rotary and Mission Systems (~26% sales) which houses combat ships, naval electronics and helicopters; Missiles and Fire Control (~16% sales) which creates missile defense systems; and Space Systems (~17% sales) which produces satellites.
Lockheed Martin reported strong first-quarter results. Companywide net sales increased 4% while diluted GAAP earnings per share increased 8% to $6.56 year-over-year. All four business segments again increased net sales. The Aeronautics segment increased net sales slightly to $6.387 billion due to increased production of F-16. The company’s outlook for 2021 was increased to revenue of at least $67 billion and diluted earnings per share of $26.40 -$26.70.
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.
Blue Chip Stock #4: Merck & Co. (MRK)
- Dividend History: 10 years of consecutive increases
- Dividend Yield: 3.3%
Merck & Company is one of the largest healthcare companies in the world. Merck manufactures prescription medicines, vaccines, biologic therapies, and animal health products.
Merck announced first quarter earnings results on 4/29/2021. Revenue increased 0.2% to $12.1 billion, but missed expectations by $570 million. Adjusted earnings-per-share of $1.40 per share fell 6.7% year-over-year.
Keytruda, which treats cancers such as melanoma that cannot be removed by surgery, and non-small cell lung cancer, remains an excellent source of growth as revenue eclipsed the $14 billion mark in 2020. Keytruda sales increased 16% in the 2021 first quarter, to $3.9 billion.
Source: Investor Presentation
Januvia/Janumet, which treats diabetes and is Merck’s second-highest grossing product, showed some signs of stabilization as revenue was higher by 1%. Animal Health sales increased 17% to $1.4 billion due to strength in demand for companion animal products, such as the parasiticide line, and companion animal vaccines.
Merck expects adjusted EPS in a range of $6.48 to $6.68 and revenue of $51.8 billion to $53.8 billion for 2021. We expect 5% annual EPS growth over the next five years. In addition to valuation changes and the 3.3% dividend yield, we expect total returns of 12.5% per year for Merck stock.
Blue Chip Stock #3: Comcast Corporation (CMCSA)
- Dividend History: 13 years of consecutive increases
- Dividend Yield: 1.7%
Comcast Corporation is a media, communications, and entertainment conglomerate. Its operating segments include Cable Communications, NBCUniversal, Theme Parks, Broadcast TV, and Sky. Collectively, through these segments, Comcast offers high-speed Internet, video, voice, wireless, cable networks, filmed TV, and other services. Comcast generates over $100 billion in annual revenue.
Comcast reported 2021 first-quarter financial results on April 29th. For the first quarter, revenue of $27.2 billion increased 2.3% year-over-year, and beat analyst estimates by $470 million. Adjusted EBITDA of $8.41 billion also beat estimates, which called for $7.54 billion. The cable segment performed well, posting its third consecutive quarter of double-digit adjusted EBITDA growth.
Source: Investor Presentation
Separately, Comcast reported reaching 42 million subscribers for its Peacock stand-alone streaming service. Free cash flow of $5.28 billion again beat expectations of $2.74 billion. On an adjusted basis, earnings-per-share of $0.76 beat by $0.18, and represented 7% year-over-year growth.
We expect 12% annual earnings-per-share growth over the next five years, as the company has a long history of growth. From 2010 to 2019, its EPS grew every year, by an average of 19% per year. We expect a recovery as soon as the COVID-19 pandemic ends.
Over the next five years, as the economy normalizes, we see several drivers for the company’s earnings growth. Revenue growth will be driven primarily by a higher customer count and rate increases. Although video revenue is struggling with cord-cutting, higher revenues in the high-speed internet business have more than offset this headwind.
Shares have a relatively low dividend yield of 1.7%, but the combination of dividends and expected EPS growth of 12% per year (with a relatively flat P/E multiple) will fuel expected returns of 13.8% per year.
Blue Chip Stock #2: Bristol-Myers Squibb (BMY)
- Dividend History: 11 years of consecutive increases
- Dividend Yield: 3.1%
Bristol-Myers Squibb is a leading drug maker of cardiovascular and anti-cancer therapeutics, with annual revenues of about $42 billion.
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.
The end result is that Bristol-Myers Squibb is now an industry giant, which continues to generate strong results even during the coronavirus pandemic.
Source: Investor Presentation
Bristol-Myers reported a mixed first-quarter report on April 29th. Revenue of $11.1 billion rose 3% year-over-year, and 8% excluding COVID-19 related buying patterns from the prior-year quarter. However, revenue missed expectations which called for $11.16 billion.
U.S. revenue increased 4% to $7.0 billion in the quarter. International revenues increased 1% to $4.1 billion in the quarter, but declined 5% after excluding foreign exchange impacts. Adjusted earnings-per-share of $1.74 grew 1.2% from the same quarter last year, but missed expectations by $0.07 per share.
The company also reiterated its 2021 non-GAAP EPS guidance range of $7.35-$7.55. Worldwide revenue is expected to increase in the high-single digits for 2021. The company expects to maintain a non-GAAP gross margin of 80.5% for the full year. Therefore, Bristol-Myers Squibb expects 2021 to be another year of growth. We expect 3% annual earnings growth over the next five years for BMY.
The company’s recently announced $2 billion addition to its share repurchase is another 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 8.6. 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 3.0% dividend yield, leading to total expected returns of 14.8% per year over the next five years.
Blue Chip Stock #1: Perrigo Company plc (PRGO)
- Dividend History: 19 years of consecutive increases
- Dividend Yield: 2.4%
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.
On 3/1/2021, the company announced that it would sell its Generic Rx Pharmaceuticals business to Altaris Capital partners for $1.55 billion.
Perrigo also reported earnings results for the 2021 first quarter on May 11th. Net sales were $1.01 billion, a decrease of 6.8% year over year, due primarily to difficult comparisons as the year-ago quarter involved pandemic-related pantry loading. The 2021 first quarter also had a low incidence of cough/cold related illness versus the same quarter a year ago.
Source: Investor Presentation
Adjusted earnings–per–share declined 25% for the quarter, but most of the decline was due to the benefit of pantry stockpiling in the year-ago quarter.
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. Overall, we expect 5% annual earnings growth through 2026.
Perrigo stock trades for a 2021 P/E ratio below 10, compared with our fair value estimate of 10. Shareholder returns will be boosted by a rising valuation multiple, expected EPS growth of 5%, and the current dividend yield of 2.2%. Overall, total returns are expected to reach 15.6% per year over the next five years.
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.
The coronavirus pandemic of 2020 had a significant impact on the global economy, but high-quality blue chips such as the 7 in this article continued to generate profits, and pay dividends to shareholders. They also have compelling valuations that make them attractive picks for investors interested in total returns.