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Before extolling the benefits of high-yield blue-chip stocks, it’s important to acknowledge the reality that many investors feel. Long-term equity investors have had to muddle through challenging macroeconomic headwinds in 2023. High inflation, rising interest rates, bank failures, two government shutdowns averted, and a new war that is fueling concerns of a wider conflict.
Did I miss something? Probably. 2023 was a year many investors would like to forget.
It’s times like these when you hear the negative remarks about a 401(k) becoming a 201(k). But seeing your retirement savings shrink is no laughing matter.
That’s where high quality blue chip stocks come into play. These stocks are known for their defensive characteristics. They will not outperform growth stocks when the bulls push the market higher. On the other hand, they tend to underperform when the market is in a correction. They won’t be the names to brag about on the golf course. But you’ll be glad you own them when it’s time to play pickball.
And the real benefit to these stocks is that they pay a dividend that increases your total return. Over time, a strong total return is the key to building wealth. Here are seven high-quality blue chip stocks to help you meet your retirement goals, no matter where you are in your investment journey.
AbbVie (ABBV)
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AbbVie (NYSE:ABBV) is first on this list of high-yielding blue-chip stocks that make sense in any retirement portfolio. Biopharma stocks are constantly affected by short-term news. In AbbVie’s case, the stock is down about 14% in 2023 on concerns about a patent cliff for its lead drug, Humira.
A patent cliff occurs when a drug, such as Humira, is subject to competition from generic (and lower cost) brands. However, the impact of that competition is not taking as big a bite out of Humira sales as feared. In addition, the company is getting strong performance from two new drugs, Skyrizi and Rinvoq.
The message for long-term investors is that with a company like AbbVie, it’s all about the pipeline. AbbVie has a deep one that should continue to reward investors for years.
The five-year total return of ABBV stock is 92.81%. That means $1,000 invested in 2018 would be worth $1,920.81. Part of that total return comes from the company’s dividend, which currently yields 4.3% and has a $5.92 annual payout per share, currently. AbbVie is a Dividend King, meaning it has increased its dividend for at least 50 consecutive years.
Johnson & Johnson (JNJ)
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Johnson & Johnson (NYSE:JNJ) has been a difficult stock for long-term investors in the last five years. The total return on JNJ shares was only 17.7%. At just over 3% a year, that’s not keeping up with inflation.
There are reasons for that. The company tried to reach a settlement in its talc lawsuit. But even when it does, investors will be waiting to see the impact on the company’s bottom line.
The company has also completed a spin-off of its consumer health brands division, which will allow it to focus on its core business. The new company, Kenvue (NYSE:WHICH), went public earlier this year.
Sure, JNJ stock hasn’t done much in price over the past five years. But with the litigation issue largely behind it and the company becoming more streamlined, it’s not hard to imagine that the stock will perform much better in the next five years. That will give long-term investors a reason beyond the dividend to be glad they own the stock.
Duke Energy (DUK)
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When you think of high-quality blue chip stocks, utilities often come to mind. These are names your grandparents held in their retirement accounts. And Duke Energy (NYSE:DUK) is a prime name to consider. But there are reasons to believe that Duke isn’t your grandfather’s useful stock – at least not entirely.
Duke owns 50,000 megawatts of power in six states including Florida. The number of people who are moving or have already moved to the Sunshine State gives you an idea of the customer base the utility will have in the coming years.
The total return for DUK shares in the last five years is 26.3%. And when you consider that Duke’s dividend yield is 4.63%, you know that’s where investors are getting most of their growth. However, at a time when many companies are warning of a profit recession, Duke projects 5% to 7% EPS growth through 2027, which will put a floor on DUK stock.
Williams Companies (WMB)
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The world is clearly pivoting to renewable energy. And now, natural gas is one form of clean energy that is abundant and rising in price. That brings us to the Williams Companies (NYSE:WMB). The midstream company is one of the main distributors of natural gas in the country. The company’s operations span 30,000 miles in 25 states.
And that’s just in the US. In a recent interview with CNBC, CEO Alan Armstrong said the company is well positioned to handle the expected growth in demand for natural gas in the coming years both in the United States and abroad.
Williams Companies has a five-year total return of 93.37%. That’s a 930.37 increase on a $1,000 investment. And there is reason to believe that such activity is sustainable. Williams has paid a quarterly dividend for more than 50 years. That dividend currently yields 5.14%. This is a stock that is about as permanent as it gets. The company has a forward P/E of just 17x earnings.
PepsiCo (PEP)
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Another area where you can look for defensive stocks is in consumer staples. PepsiCo (NASDAQ:PEP) may not fit the classic definition of a commodity. But don’t tell shareholders that. The company continues to deliver quarter after quarter.
The main takeaway for investors is the company’s pricing power. As inflation heated up, Pepsi showed the ability to pass on at least part of its costs. That’s sustained revenue growth, which Pepsi is happy to return to shareholders in the form of share buybacks and dividends.
You can flip a coin and land Coca-Cola (NYSE:CO) here. Or heck, just own both. But if you have to choose just one, PEP stock looks like a better choice in terms of total return. You get high single-digit share price growth over the last five years and a dividend yield of 3.03% and a payout of $5.06 per share annually. That results in a 65% total return in the last five years.
Texas Instruments (TXN)
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Texas Instruments (NASDAQ:TXN) is a conservative play among semiconductor stocks. The company will not forget investors Nvidia (NASDAQ:NVDA). In fact, the company’s products are not widely adopted in the artificial intelligence space.
But the company’s semiconductor chips are used in a range of applications, including AI, which gives the company a broad customer base and one of the healthiest operating margins in the sector. That probably didn’t do much for investors in 2023. The company’s revenue and earnings are both down year over year. Not surprisingly, TXN stock is also down more than 8% in 2024.
But this is about long-term growth, and that’s where the company shines. In the past
Public Storage (PSA)
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When it comes to high quality blue chip stocks, real estate investment trusts (REITs) come to mind. These companies pay regular, in many cases monthly, dividends. And due to their structure they must return at least 90% of their earnings to shareholders in the form of dividends.
As its name implies, Public Storage (NYSE:PSA) is a REIT that owns, acquires, develops and operates self-storage facilities in the United States and Europe. As of October 2023, the company had properties in 40 states. PSA stock has had a total return of 61% over the past five years.
Public Storage is agnostic to the housing market. People need to store their stuff and Public Storage owns the facilities that help them do that. There could also be a longer-term trend here of downsizing to more affordable housing. But on the condition that you cannot sell everything, there will be a demand for storage units long into the future.
As of the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com’s Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
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