Updated on September 14th, 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:
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 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 7 favorite blue chip stocks are analyzed in detail below.
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: Bancfirst Corp. (BANF)
- Dividend History: 28 years of consecutive increases
- Dividend Yield: 2.5%
BancFirst Corp. (BANF) serves as the financial holding Company for BancFirst, a state–chartered bank in Oklahoma. The Company was founded in 1984, and the subsequent year proceeded to merge with seven other bank holding companies based in Oklahoma. BancFirst has 107 banking locations serving 58 communities throughout Oklahoma.
BancFirst offers a variety of commercial banking services to retail customers and small and mid–sized businesses. For retail customers, this includes checking, savings, CDs, personal loans, and other services. The bank offers business lending services for commercial customers, including agricultural and multi–family loans, and various business banking services.
BANF stock trades for a 2021 P/E ratio of 12, compared with our fair value estimate of 15. Shareholder returns will be boosted by a rising valuation multiple, expected EPS growth of 6%, and the current dividend yield of 2.6%. Overall, total returns are expected to reach 12.5% per year over the next five years.
Click here to download our most recent Sure Analysis report on Bancfirst (preview of page 1 of 3 shown below):
Blue Chip Stock #6: Royal Gold, Inc. (RGLD)
- Dividend History: 20 years of consecutive increases
- Dividend Yield: 1.1%
Royal Gold Inc. is a precious metals royalty and streaming company that owns interest in some of the world’s most desirable mines. The corporation’s main focus is acquiring and managing precious metal stream and royalty interests.
The stock trades for a 2021 P/E ratio is 26, compared with our fair value estimate of 35. Shareholder returns will be boosted by a rising valuation multiple, expected EPS growth of 5.5%, and the current dividend yield of 1.1%. Overall, total returns are expected to reach 12.6% per year over the next five years.
Click here to download our most recent Sure Analysis report on Royal Gold (preview of page 1 of 3 shown below):
Blue Chip Stock #5: South Jersey Industries (SJI)
- Dividend History: 22 years of consecutive increases
- Dividend Yield: 5.1%
South Jersey Industries buys, transports, stores, and sells natural gas. The utility operates in three segments: SJI Utilities, SJI Midstream, and South Jersey Energy Solutions. Elizabethtown Gas was acquired in 2018. The company owns and operates rooftop solar generation at corporate sites, fuel cells, and is investing in renewable natural gas projects.
Additionally, the utility owns oil, gas, and mineral rights in the Marcellus Shale region of Pennsylvania. South Jersey owns roughly 10,000 miles of distribution and transmission pipeline and serves over 700,000 total customers.
SJI stock trades for a 2021 P/E ratio of 14.5, compared with our fair value estimate of 18. Shareholder returns will be boosted by a rising valuation multiple, expected EPS growth of 3%, and the current dividend yield of 5.1%. Overall, total returns are expected to reach 13.6% per year over the next five years.
Click here to download our most recent Sure Analysis report on South Jersey Industries (preview of page 1 of 3 shown below):
Blue Chip Stock #4: AT&T Inc. (T)
- Dividend History: 36 years of consecutive increases
- Dividend Yield: 7.6%
AT&T is a telecommunications giant, as its core Communications segment provides mobile, broadband and video to 100 million U.S. consumers and 3 million businesses. In the 2021 second quarter, AT&T generated $44.0 billion in revenue, up 7.6% from Q2 2020. Adjusted earnings-per-share (EPS) equaled $0.89 compared to $0.83 in the year ago quarter. AT&T ended the quarter with a net debt-to-EBITDA ratio of 3.15x.
Source: Investor Presentation
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. AT&T also has a long history of increasing dividends each year (AT&T is currently a Dividend Aristocrat).
With a P/E below 10, AT&T is undervalued against our fair value estimate of 11. The combination of 3% expected EPS growth and the 7.6% dividend yield lead to total expected returns of 13.9% per year over the next five years.
Click here to download our most recent Sure Analysis report on AT&T (preview of page 1 of 3 shown below):
Blue Chip Stock #3: The Scotts Miracle-Gro Company (SMG)
- Dividend History: 12 years of consecutive increases
- Dividend Yield: 1.7%
The Scotts Miracle–Gro Company is one of the world’s leading marketers of branded consumer lawn and garden as well as hydroponic and indoor growing products. The company offers fertilizers, grass seed products, spreaders, outdoor cleaners, and any lawn–related weed, pest, and disease control products. Scotts Miracle–Gro generates around $4.3 billion in annual revenue.
On August 4th, 2021, Scotts Miracle–Gro reported its Q3–2021 results for the quarter ended July 3rd, 2021. The company achieved sales of $1.61 billion during the period, an 8.1% increase compared to Q3–2020, primarily driven by a 48% increase in the Hawthorne segment.
Shares have a relatively low dividend yield of 1.8%, but the combination of dividends and expected EPS growth of 7% per year (with a flat P/E multiple) will fuel expected returns of 14.5% per year.
Click here to download our most recent Sure Analysis report on Scotts Miracle-Gro (preview of page 1 of 3 shown below):
Blue Chip Stock #2: Lockheed Martin (LMT)
- Dividend History: 19 years of consecutive increases
- Dividend Yield: 3.0%
Lockheed Martin is the world’s largest defense company. About 60% of the company’s revenues comes from the U.S. Department of Defense, with other U.S. government agencies (10%) and international clients (30%) making up the remainder.
Lockheed Martin reported another good quarter for for Q2 2021 on July 26th, 2021. Companywide net sales increased to $17,029M from $16,220M and diluted GAAP earnings per share increased to $6.52 from $5.79 on a year–over–year basis. All four business segments again increased net sales.
Source: Investor Presentation
We expect Lockheed Martin to generate earnings-per-share of $26.85 in 2021. Based on this, the stock is currently trading at a price-to-earnings ratio (P/E) of 12.8. Our fair value estimate is a P/E of 16.0, which means expansion of the P/E multiple could increase returns.
When combined with the 8% anticipated EPS growth rate and 3% dividend yield, total return potential comes to 15.0% per year over the next half-decade.
Click here to download our most recent Sure Analysis report on Lockheed Martin (preview of page 1 of 3 shown below):
Blue Chip Stock #1: 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
Based on expected EPS of $7.45, shares of BMY trade for a forward P/E ratio of 8.4. 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 3.1% dividend yield, leading to total expected returns of 15.4% per year over the next five years.
Click here to download our most recent Sure Analysis report on Bristol-Myers Squibb (preview of page 1 of 3 shown below):
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 chip stocks 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.
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