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7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List


Investing in blue chip stocks with dividends is a perfect match. Blue chip stocks have a history of producing above-market returns, and if you mix them with dividends, there’s no such thing. Investors seeking regular returns and minimizing their risk should opt for blue-chip stocks that pay dividends.

Investing in the biggest and strongest companies – known as blue chip stocks – is a great way to earn strong returns with low downside risk. Blue chip stocks are owned by high quality companies that are generally leaders in their industry. With incredible fundamentals, their stocks offer strong price returns to investors. However, not all pay dividends, but such a combination is tailor-made for the current macroeconomic environment.

Here are seven such stocks to add to your shopping list.

IBM IBM $140.81
LMT Lockheed Martin $442.11
DYNAMISM PepsiCo $166.42
TJX TJX Companies $63.25
LUMN Lumen Technologies $11.78
MCD McDonald’s $249.17
M.K.R. Merck $90.35

IBM (IBM)

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Tech stocks have been hiding in recent months, but IBM (NYSE:IBM) stock was an anomaly. It has gained a healthy 21% in value over the past six months due to a relatively impressive operating performance. Moreover, it offers a very attractive dividend with a payout ratio close to 70% and a yield of 4.74%.

IBM’s first quarter results show a strong 8% increase in sales. It’s the first quarter for IBM’s New Look, as it completed its multi-year effort to transform its business. It believes it can continue to grow its revenue rapidly through its software business focused on AI and cloud computing. Additionally, its large consulting business also generates an impressive $4.8 billion in Q1 revenue, a 17% year-over-year increase.

Lockheed Martin (LMT)

7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List

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Lockheed Martin (NYSE:LMT) is the largest defense contractor in the U.S. Armed Forces, which means its biggest customer has the deepest pockets. It has established itself as an undisputed industry leader with reliable revenue streams, remarkably consistent results, and the ability to weather economic downturns. It boasts an enviable dividend profile, with 20 years of payout growth and an eye-catching yield of around 2.5%.

The ongoing conflict in Ukraine could potentially lead to a revenue windfall in the years to come. Europe will be a key market for defense contractors, with several countries looking to boost their defense capabilities. Finland and Sweden have indicated that they will apply for NATO membership.

Additionally, Germany announced an upgrade of its fighter jets with the purchase of 35 F-35 fighter jets from LMT. I expect more countries in Europe to follow suit, which should make up for lost sales from the Pentagon which recently reduced its shopping list with the company.

PepsiCo (PEP)

7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List

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Giant snacks and drinks PepsiCo (NASDAQ:DYNAMISM) continues to impress the market with its innovation and ability to meet the toughest challenges. Inflation rates are near multi-year highs as consumer confidence remains at rock bottom.

Despite these challenges, its business is thriving, indicating that its earnings are strong and its dividend is increasing by 7 cents per quarter to $4.60 per year. It now offers an attractive prospective dividend yield of 2.8%.

PepsiCo’s timeless brands have enabled it to weather the current macro-economic crisis effectively. Despite supply chain pressures and a pullout from Russia, the company’s earnings per share in the first quarter fell from $1.21 last year to $1.29 this year.

This encouraging result is due to effective management of costs and prices. Therefore, its robust branding ability and pricing power make the stock an effective hedge against inflation.

TJX companies (TJX)

7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List

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TJX Companies (NYSE:TJX) is a leading discount retailer with a proven track record of sustained sales and profit growth. It has posted a steady increase in sales and earnings over the past three decades, and its stock has also performed well.

The pandemic closed most of its stores, which strongly impacted its results. However, the tailwinds to reopening will likely trigger a comeback for the business in the coming quarters. Additionally, consumers are likely to favor discount retailers such as TJX amid inflationary pressures.

Its management is confident of better prospects with higher-margin cash flow and sales growth in the coming quarters. Additionally, it has an inventory of $7 billion, up from around $5 billion a year ago, which positions it incredibly well for the summer season. TJX stock offers a reasonable dividend payout to further sweeten the deal, yielding 1.9%.

LumenTechnologies (LUMN)

7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List

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Lumen Technologies (NYSE:LUMN) is a telecommunications operator, similar to its peers, moving from a traditional fixed service to more advanced offers such as fiber optics. The goal is to provide robust connectivity by expanding fiber optic capacity and investing in other architectures.

LUMN stock is trading at an attractive valuation in occasional forward sales, with a dividend yield of 8.5%. The beauty of the company is that its dividend is covered solely by cash flow.

Lumen recently increased its free cash flow and EBITDA (earnings before interest, tax, depreciation and amortization) guidance by $400 million. It now expects FCF to be between $2 billion and $2.2 billion, while its adjusted EBITDA will be between $6.9 billion and $7.1 billion. Its fiber business has seen incredible growth lately and should dictate its future direction.

McDonald’s (MCD)

7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List

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McDonald’s (NYSE:MCD) is one of the most popular fast food chains in the world. Despite fierce competition and market saturation, it remains one of the behemoths in the sector. It offers strong upside potential thanks to its ability to outperform its competitors in challenging environments. Moreover, it benefits from a spectacular dividend profile with a yield of 2.2% and 13 years of growth.

McDonald’s restaurants generate over $100 billion in sales each year, and no one comes close to dominating it. Over the past two years, it has benefited from the push into digital and home delivery niches.

Its recently released first quarter results showed comparable store sales growth of 20.4% and 3.5% globally and in the United States, respectively. Additionally, digital sales accounted for more than 30% of system-wide sales for MCD’s six major markets.

Merck’s (M.K.R.)

7 Blue-chip Stocks With Dividends To Add To Your Q2 Shopping List

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Merck’s (NYSE:M.K.R.) is a leading pharmaceutical giant with an extensive oncology portfolio. There are several drugs in its portfolio including several cancer drugs including Keytruda, Lenvima and others. These drugs offer strong competitive advantages, which brought in more than $5 billion in sales in the first quarter, a growth of 25% compared to the same quarter last year.

Experts project that Merck has an incredible head start with the approval of multiple therapies. Besides its cancer drugs, Merck’s human papillomavirus vaccine, Gardasil, and recently released coronavirus pill, Lagevrio, could potentially generate billions in sales.

The company has increased its dividend over the past 12 years, and its chief financial officer Caroline Litchfield says the company is committed to increasing its dividend over time.

At the date of publication, Muslim Farooque did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Muslim Farooque is a passionate investor and an optimist at heart. A long-time gamer and tech enthusiast, he has a particular affinity for analyzing tech stocks. Muslim holds a Bachelor of Science in Applied Accounting from Oxford Brookes University.

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