Dividend Powerhouses: Blue-Chip Stocks Built for the Long Haul

Key Points

• Coca-Cola is a good example of why it’s important for investors to take the long view with blue-chip stocks.
• General Dynamics looks to be “DOGE-proof” with its AI initiatives.
• ExxonMobil is a standout in a sector even when profits will be under pressure. 

With investment themes like cryptocurrency adoption, sending rockets to Mars, and using artificial intelligence to find cures for some of the world’s most intractable diseases, the idea of investing in blue-chip stocks can seem boring. But boring stocks can be beautiful for your portfolio. 

Blue-chip companies are known for being at a mature stage in their business cycle. They’re not the companies you expect to be disruptive. And their innovation largely comes through acquiring smaller companies.

But what these companies may lack in sizzle, they deliver in fundamentals. Investing in blue-chip stocks means that you’re investing in companies with solid balance sheets anchored by consistent revenue and earnings. In many cases, these companies reward shareholders with stock buybacks and by paying out a portion of those profits via dividends.

These are all reasons why blue-chip stocks are often referred to as “sleep well at night” stocks because you have the confidence that these stocks will be there for the long haul, you don’t have to be concerned about sharp short-term moves in one direction or another.

If those sound like stocks you’re looking for during this most recent period of market volatility, here are three blue-chip dividend stocks that are offering investors future growth in addition to attractive value.

Coca-Cola Shows Beauty Is in the Eye of the Beholder

The Coca-Cola Company NYSE: KOis an iconic blue-chip stock that many investors recognize as a favorite of Warren Buffett. But is that enough to believe that this dividend king can provide a jolt to a buy-and-hold portfolio?

On the one hand, you can argue that the company is finding growth tough to come by. Despite moving into new categories, such as energy drinks, the company is having trouble improving its topline. That means the company’s earnings growth has come from higher prices, not higher volumes.

However, if you’re taking a long view and looking at stocks that can outperform the broader market, KO stock still looks attractive. Over the past five years, the stock has delivered a total return of 24.24%. Not only is that higher than the sector average of 14%, but it also outpaces the total return of the S&P 500, which is 14.87% over the same period. As part of that total return, you get a dividend with a yield of 3.15% as of this writing.

General Dynamics Is Not Your Ordinary Defense Contractor

Many investors would expect aerospace stocks like General Dynamics Corp. NYSE: GD to rocket higher with Trump 2.0 in place. But that hasn’t been the case, and that’s because of Musk's first friend, Elon Musk’s DOGE commission, which is tasked with rooting out government waste and inefficiency.

As one of the top line items in the federal budget, defense spending looks to be a prime target. Time will tell. But even if it is, General Dynamics appears to be in a safe place.

To begin with, there will always be a market for and a need for the physical weapons the company provides, such as the Abrams tank. Second, General Dynamics was awarded a $922-million contract to upgrade the IT infrastructure of the U.S. Central Command (CENTCOM) in February 2024. Part of that contract will involve the company’s Luna AI system, which is specifically designed for government and defense applications.

That means you can look beyond the short term and consider a stock that’s delivered a total return of over 64% in the last five years. Plus, at 19x forward earnings, GD stock is trading below the sector average of around 27x. 

ExxonMobil Will Do Well Even If Oil Prices Do Not

Investors are starting to think about what “drill baby, drill” really means for oil prices. Simply put, the more oil that companies like Exxon Mobil Corp. NYSE: XOM produce, the lower the price of oil gets. That will mean lower profits for oil companies and, most likely, lower stock prices.

Oil companies are used to this supply-demand dance, and steps have been taken to ensure it’s not overextended. The company laid out a December corporate plan that includes everything investors need to know, including earnings and cash flow expectations, capital return programs, and cost-saving targets. In fact, the company, which already has a breakeven level with oil around $50 a barrel, is making plans to be profitable even with oil near $30 a barrel. 

That means you can look beyond the headlines and appreciate the value in XOM stock, which is trading for around 14x forward earnings and pays a dividend that has increased for 24 consecutive years.