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In this article, we discuss 10 blue chip dividend stocks with over 3% yield. If you want to see some more dividend paying blue chip stocks, click 5 Blue Chip Dividend Stocks with Over 3% Yield.
A blue chip stock refers to a company with mature operations, stable performance, and financially sound balance sheets. These companies have earned the loyalty and trust of investors and customers alike, and their market survival power allows them to remain on top of their respective sectors.
On January 29, Bill Ackman, the billionaire CEO of Pershing Square, said that his hedge fund has previously profited when other investors gave in to the broader market selloff and discarded high quality names from their portfolios. He believes that top stocks that are beaten down but have a strong historical performance must be acquired from a long-term investment perspective. Jonathan Gray, president of the global investment firm Blackstone, shared similar views on beaten down quality names, citing that the crashing Nasdaq could create opportunities. Similarly, Cathie Wood of ARK Investment Management has never shied away from investing in quality stocks despite underperformance, since she believes that “innovation is on sale” once prices decline.
Dividends are an effective inflation hedge, but investors need to assemble their portfolios carefully in this volatile market environment. Supply shortages, labor pressures, COVID headwinds, and the Russia-Ukraine war, paired with high inflation and rising rates are factors that can shake up many companies to the point of turning losses, slashing or stopping dividends, and even shutting down altogether.
To protect investment portfolios in the current market, it is imperative to hold high quality names which have a history of outperformance despite tough market conditions. This is why investors should seek out blue chip dividend stocks like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Bank of America Corporation (NYSE:BAC), in addition to others discussed in detail ahead.
We chose blue chip dividend stocks that yield over 3% as of April 22. Positive analyst ratings, solid earnings, and strong business fundamentals were classifiers as well. Data from 900+ elite hedge funds tracked by Insider Monkey at the end of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Blue Chip Dividend Stocks with Over 3% Yield
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 44
Dividend Yield as of April 22: 4.75%
International Business Machines Corporation (NYSE:IBM) is an American multinational provider of technology integrated solutions and services worldwide. The company has four core business segments – Software, Consulting, Infrastructure, and Financing.
On April 19, International Business Machines Corporation (NYSE:IBM) reported earnings for the first quarter of 2022, posting an EPS of $1.40, beating market consensus by $0.01. The Q1 revenue came in at $14.20 billion, outperforming analysts’ estimates by approximately $353 million.
International Business Machines Corporation (NYSE:IBM) latest dividend was declared on February 1. A $1.64 per share quarterly dividend was distributed to shareholders on March 10. The company’s dividend yield on April 2022 stood at 4.75%.
BofA analyst Wamsi Mohan on April 20 reiterated a Buy recommendation on International Business Machines Corporation (NYSE:IBM) and raised the firm's price target on the shares to $165 from $162, citing the company’s "solid" Q1 results and a "strong" outlook for 2022. International Business Machines Corporation (NYSE:IBM)’s newly reconfigured portfolio is defensive and can outperform in a difficult macro environment, and sustained revenue growth beyond 2022 is expected, the analyst told investors.
Among the hedge funds tracked by Insider Monkey, 44 funds reported owning stakes in International Business Machines Corporation (NYSE:IBM) at the end of December 2021, compared to 41 funds in the preceding quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held one of the leading positions in the company, with 3.2 million shares worth $440.5 million.
Here is what St. James Investment Company has to say about International Business Machines Corporation in its Q4 2021 investor letter:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties, and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
9. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 82
Dividend Yield as of April 22: 3.64%
AbbVie Inc. (NYSE:ABBV) is an American biopharmaceutical company that develops and distributes commercial drugs for autoimmune and intestinal diseases, rheumatoid arthritis, chronic lymphocytic leukemia, small lymphocytic lymphoma, hypothyroidism, prostate cancer, and endometriosis, among other ailments.
On April 20, AbbVie Inc. (NYSE:ABBV) announced that it is expanding its research collaboration with Dragonfly Therapeutics, a biotechnology firm that creates novel immunotherapies to strengthen the immune system for the treatment of autoimmune and fibrotic diseases. Under the agreement, Dragonfly will grant AbbVie Inc. (NYSE:ABBV) the chance to license exclusive intellectual property rights for several new drug candidates created using Dragonfly's TriNKET technology platform. AbbVie Inc. (NYSE:ABBV) will make an upfront payment to Dragonfly, as well as future milestone payments upon success, and product royalties.
AbbVie Inc. (NYSE:ABBV) declared on February 17 a $1.41 per share quarterly dividend, in line with previous. The dividend is payable on May 16, to shareholders of record on April 15. The company’s dividend yield on April 22 came in at 3.64%.
Wells Fargo analyst Mohit Bansal recommended investors to view the weakness in AbbVie Inc. (NYSE:ABBV) shares after the departure of vice president Mike Severino as a buying opportunity. The company management stressed that Severino’s exit will not be "hugely disruptive to either succession planning or R&D strategy." The analyst believes that AbbVie Inc. (NYSE:ABBV) has a strong leadership and he kept an Overweight rating on the shares with a $165 price target on April 13.
According to Insider Monkey’s Q4 data, 82 hedge funds were long AbbVie Inc. (NYSE:ABBV), compared to 81 funds in the preceding quarter. The total stakes held in the fourth quarter amounted to $3.74 billion. Berkshire Hathaway is the biggest shareholder of the company, with a position worth $410.74 million.
In addition to Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Bank of America Corporation (NYSE:BAC), AbbVie Inc. (NYSE:ABBV) offers a rich dividend history.
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) AbbVie (ABBV). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
8. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 34
Dividend Yield as of April 22: 3.11%
American Electric Power Company, Inc. (NASDAQ:AEP) was incorporated in 1906 and is headquartered in Columbus, Ohio. It operates as an electric utility holding company, engaged in the generation and distribution of power to retail and wholesale customers in the United States.
The company has a 13-year history of increasing its dividend payments. On January 18, American Electric Power Company, Inc. (NASDAQ:AEP) declared a quarterly dividend of $0.78 per share. The dividend was distributed to shareholders on March 10, and the company offers a dividend yield of 3.11% as of April 22.
On February 24, American Electric Power Company, Inc. (NASDAQ:AEP) reported its financial results for the fourth quarter of 2021. The company posted earnings per share of $0.98, exceeding market consensus by $0.06. The $4.08 billion revenue also outperformed analysts’ estimates by $136.80 million.
Mizuho analyst Paul Fremont on March 29 maintained a Buy recommendation on American Electric Power Company, Inc. (NASDAQ:AEP) and raised the firm's price target on the shares to $104 from $94. The analyst updated his model to account for increased capital expenditure and American Electric Power Company, Inc. (NASDAQ:AEP) reallocating funding from its unregulated contracted renewables division to its regulated transmission segment. He estimates 7.0% annual earnings growth through 2024 off the midpoint of 2021 guidance.
In the fourth quarter of 2021, 34 hedge funds reported long positions in American Electric Power Company, Inc. (NASDAQ:AEP), with combined stakes valued at $827.8 million. Jim Simons’ Renaissance Technologies held the leading position in the company, with 1.6 million shares worth $148.3 million.
7. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Holders: 13
Dividend Yield as of April 22: 4.36%
Iron Mountain Incorporated (NYSE:IRM) offers data storage and information management services worldwide. The company manages enterprise-level data records, in addition to offering information destruction, data backup, and recovery services.
Iron Mountain Incorporated (NYSE:IRM) on February 24 declared a $0.6185 per share quarterly dividend, in line with previous. The dividend was paid to shareholders on April 6. Iron Mountain Incorporated (NYSE:IRM)’s dividend yield on April 22 stood at 4.36%.
In 2021, Iron Mountain Incorporated (NYSE:IRM)’s full-year revenue came in at $4.4 billion, compared to a revenue of $4.1 billion in the previous year. Net income in 2021 increased to $450.2 million from $342.7 million in 2020. The company’s cash and cash equivalents in 2021 stood at $255.8 million, up from 205.1 million in the last year.
On April 12, Stifel analyst Shlomo Rosenbaum maintained a Buy rating on Iron Mountain Incorporated (NYSE:IRM) and raised the firm's price target on the stock to $62 from $52. He revisited his outlook on the shares entering earnings season, citing his view that the CFO set company guidance to be "appropriately conservative" and that there isn't a near-term catalyst that would impact Iron Mountain Incorporated (NYSE:IRM)’s ability to generate healthy pricing. He also sees "increased optionality" around mergers and acquisitions, which can raise Iron Mountain Incorporated (NYSE:IRM)’s revenue growth trajectory, the analyst told investors.
According to Insider Monkey’s Q4 data, 13 hedge funds held long positions in Iron Mountain Incorporated (NYSE:IRM), with collective stakes worth $55.2 million. Phill Gross and Robert Atchinson’s Adage Capital Management owned a prominent position in the company, with 308,552 shares valued at $16.1 million.
6. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 49
Dividend Yield as of April 22: 3.08%
The Bank of New York Mellon Corporation (NYSE:BK) offers a range of financial products and services in the United States, operating via Securities Services, Market and Wealth Services, Investment and Wealth Management, and Other segments. The Bank of New York Mellon Corporation (NYSE:BK) delivers a dividend yield of 3.08% as of April 22.
The Bank of New York Mellon Corporation (NYSE:BK) posted its Q1 2022 results on April 18, announcing earnings per share of $0.94, beating analysts’ consensus estimates by $0.08. The $3.93 billion revenue fell short of market forecasts by $12.30 million.
The company has raised its dividends consecutively for 11 years. On April 18, The Bank of New York Mellon Corporation (NYSE:BK) declared a quarterly dividend of $0.34 per share. The dividend is payable on May 11, to shareholders of the company as of April 28.
On April 19, Deutsche Bank analyst Brian Bedell reiterated a Buy rating on The Bank of New York Mellon Corporation (NYSE:BK) but lowered the firm's price target on the shares to $54 from $62 following the Q1 results. The analyst still expects double-digit earnings growth in 2022 and 2023.
According to the fourth quarter database of Insider Monkey, The Bank of New York Mellon Corporation (NYSE:BK) was found in the public stock portfolios of 49 hedge funds, compared to 46 funds in the prior quarter. First Eagle Investment Management is a significant shareholder of the company, with approximately 16 million shares worth $928.25 million.
Just like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Bank of America Corporation (NYSE:BAC), The Bank of New York Mellon Corporation (NYSE:BK) is a notable blue chip dividend stock to watch.
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. Smaller positions in The Bank of New York Mellon Corporation (BK) also benefited from higher rates, principally with their ability to invest customer cash.”
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Disclosure: None. 10 Blue Chip Dividend Stocks with Over 3% Yield is originally published on Insider Monkey.