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Tags: dividend stocks | retirement income | blue-chip | coca-cola | mcdonalds | black hills
OPINION

Bob Ciura: 3 Blue Chip Stocks for Safe Dividends

Bob Ciura: 3 Blue Chip Stocks for Safe Dividends
(Dreamstime)

Bob Ciura By Monday, 06 March 2023 03:59 PM EST Current | Bio | Archive

The term “blue-chip” typically refers to companies with strong business models that generate consistent profits, and pay high dividend yields to shareholders. These are generally seen as safe stocks that can continue to pay dividends from year to year, even during recessions.

Blue-chip stocks are generally known as the highest-quality dividend stocks.

This article will discuss 3 blue-chip stocks that have long histories of increasing their dividends, leadership positions in their respective industries, and solid dividend yields above the S&P 500 average.

The Coca-Cola Company (KO)

Coca-Cola is the world’s largest beverage company, as it owns or licenses more than 500 unique non-alcoholic brands. Since the company’s founding in 1886, it has spread to more than 200 countries worldwide. It has a market capitalization above $200 billion and its brands account for about 2 billion servings of beverages worldwide every day, producing about $45 billion in annual revenue.

The company also has an exceptional 61-year dividend increase streak, making it a Dividend King.

Coca-Cola reported fourth quarter and full-year earnings on February 14th, 2023, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to 45 cents, which was in line with estimates.

Revenue was up 6.3% year-over-year to $10.1 billion, which was $180 million better than estimates. Organic sales soared 15% year-over-year, which was much better than the +11.1% analysts expected. Global unit case volumes were down 1%, so the gain in organic sales was due entirely to pricing and mix gains. Organic sales soared 32% in Latin America, 16% for bottling investments, and 12% in North America.

Management guided for organic revenue growth of 7% to 8% for this year, as well as a 2% to 3% currency headwind based on current forex rates. There’s an expected 1% headwind from acquisitions, divestitures, and structural changes.

The company guided for ~$2.59 in earnings-per-share, and we’ve initiated accordingly. Coca-Cola also boosted its dividend to an annualized payout of $1.84 in early-2023, putting the company’s dividend increase streak at 61 years. Shares currently yield 3.1%.

McDonald’s Corporation (MCD)

McDonald’s, founded in 1940, is the world’s leading restaurant chain with 40,031 locations in about 119 countries at end of 2021. The highest store counts are in the US (13,438), China (4,395), Japan (2,941), France (1,517), and Germany (1,432). Approximately 93% of the stores are franchised and the rest are company owned.

However, the company owns about 55% of the real estate and 80% of the buildings in its network. Total system sales were approximately $116B and total revenue was around $23.2B in 2022.

On January 31st, 2023, McDonald’s reported Q4 2022 and full year results. For the quarter, total revenue came in at $5.9 billion, a (-1%) decrease from $6 billion compared to Q4 2021 on a 5% rise in systemwide sales offset by currency headwinds. Revenue fell (-13%) at company-owned stores, while revenue increased 7% at franchised restaurants. Earnings climbed 19% to $2.59 per share compared to $2.18 per share in comparable periods on lower operating costs. For the year, revenue was down to $23.1 billion and diluted GAAP earnings per share declined to $8.33.

Still, McDonald’s is highly profitable with a positive long-term growth outlook. The company has increased its dividend for 47 consecutive years. Shares currently yield 2.2%.

Black Hills Corp. (BKH)

Black Hills Corporation is an electric utility that provides electricity and natural gas to customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Black Hills was founded in 1941, and the company is headquartered in Rapid City, South Dakota. Black Hills Corporation has increased its dividend for more than 50 years in a row, which makes it a Dividend King thanks to five decades of dividend raises.

Black Hills’ growth over the coming years will come from several factors. This includes rate reviews, which drive revenues and profits per kilowatt hour. Another factor is the expansion of the company’s existing assets via new utility infrastructure. Black Hills regularly adds new projects to its growth investment backlog, which currently stands at $2.7 billion through 2024.

Black Hills’ planned growth investments include new electric transmission lines and new natural gas pipelines to service its customers. Rate reviews will allow Black Hills to recover investments into its existing systems, thereby more or less guaranteeing increasing revenues, which should lead to rising profits down the road.

The company pays out roughly 60% of its net profits in the form of dividends. Its decades-long dividend growth track record gives investors assurance that a dividend cut is unlikely from this utility company. Demand for electricity and gas is not very cyclical, meaning Black Hills should remain profitable under most circumstances. The fact that customers tend to stick with their provider means that Black Hills operates a relatively stable business model.

BKH stock currently yields 4.0%.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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BobCiura
The term "blue-chip" typically refers to companies with strong business models that generate consistent profits, and pay high dividend yields to shareholders.
dividend stocks, retirement income, blue-chip, coca-cola, mcdonalds, black hills
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2023-59-06
Monday, 06 March 2023 03:59 PM
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