According to Yahoo Finance, the average annual percentage yield for high-yield money market accounts is currently around 4.30%, with some banks offering rates exceeding 5.00%. While the national average for all money market accounts is lower, around 0.64%, high-yield options are significantly more competitive. You can bet that a large majority of the $7.4 trillion (which is an all-time high) is in the high-yield money markets offered by American Express, PNC Bank, and other major financial institutions. With those juicy rates and $250,000 SPIC insurance, why would anybody take their money out unless the Federal Reserve starts to lower interest rates, which will, in turn, drop the yields on the money market funds.
Blue-chip stocks are shares of large, well-established, financially stable companies with a consistent and reliable performance history. They are often considered less risky and are a popular choice for long-term investors. Additionally, nearly all leaders in the category pay dependable, recurring dividends each quarter, regardless of the state of the economy. The term “blue chip” originates from the game of poker, where a blue chip is the highest-value chip.
We decided to look for quality blue-chip dividend stocks that would pay a higher dividend than a high-yield money market after the Federal Reserve implemented three 25-basis-point interest rate cuts. Assuming rates would drop to 3.55% or lower, we sought quality stocks that pay a dividend of at least 4%. Five stocks appear to be ideal options for conservative income investors considering a shift from high-yield money market accounts. All are rated Buy at the top Wall Street firms we cover.
Why do we cover blue-chip dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciation has contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations. A study by Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the past 50 years (1973-2023). Over the same timeline, this was more than double the annualized return for non-payers (3.95%).
Bristol-Myers Squibb
Bristol Myers Squibb Co. (NYSE: BMY | BMY Price Prediction) is a global biopharmaceutical company committed to discovering, developing, and delivering innovative medicines. This top company remains a solid pharmaceutical stock to own in the long term, offering an outstanding entry point with a reliable dividend. It is committed to discovering, developing, and delivering transformative medicines for patients with serious diseases in areas such as oncology, hematology, immunology, cardiovascular disease, neuroscience, and other therapeutic areas.
Its platforms comprise chemically synthesized or small-molecule drugs, including protein degraders, as well as biologics produced through biological processes. These platforms also encompass ADCs, CAR-T cell therapies, and radiopharmaceutical therapeutics.
Small-molecule drugs are typically administered orally in the form of tablets or capsules, although other drug delivery mechanisms are also employed. Biologics are usually administered through injections or by intravenous infusion.
CAR-T cell therapies are administered by intravenous infusion.
Its growth portfolio includes:
- Opdivo
- Opdivo Qvantig
- Orencia
- Yervoy
- Reblozyl
- Opdualag
Bristol-Myers Squibb’s legacy portfolio includes:
- Eliquis
- Revlimid
- Pomalyst/Imnovid
- Sprycel
- Abraxane
Jefferies has a Buy rating with a $68 target price.
Chevron
Chevron Corp. (NYSE: CVX) is an American multinational energy corporation specializing in oil and gas. This integrated giant is a safer option for investors looking to position themselves in the energy sector and pays a rich dividend. Chevron operates integrated energy and chemicals businesses worldwide through its subsidiaries. The company operates in two segments.
The Upstream segment is involved in the following:
- Exploration, development, production, and transportation of crude oil and natural gas
- Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
- Transportation of crude oil through pipelines
- Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant
The Downstream segment engages in:
- Refining crude oil into petroleum products
- Marketing crude oil, refined products, and lubricants
- Manufacturing and marketing renewable fuels
- Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
- Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives
Chevron announced in the fall of 2023 that it had entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion, and it is expected to close this summer.
Piper Sandler has an Overweight rating with a $164 target price.
Dominion Energy
This ultra-safe utility giant pays a dependable dividend and is likely to continue doing so for years to come. Dominion Energy Inc. (NYSE: D) is a provider of regulated electricity service to about 3.6 million homes and businesses in Virginia, North Carolina, and South Carolina, as well as regulated natural gas service to 500,000 customers in South Carolina.
The company is a developer and operator of regulated offshore wind and solar power, as well as a producer of carbon-free electricity in New England.
Dominion Energy Virginia segment comprises Virginia Power’s regulated electric transmission, distribution, and generation operations, serving homes and businesses in Virginia and North Carolina.
The Dominion Energy South Carolina segment comprises DESC’s generation, transmission, and distribution of electricity to customers in the central, southern, and southwestern portions of South Carolina, as well as the distribution of natural gas to residential, commercial, and industrial customers throughout the state.
Its Contracted Energy segment includes a nonregulated electric generation fleet and renewable natural gas operations.
Barclays has a Buy rating with a $55 target price.
Prudential Financial
< Prudential Financial Inc. (NYSE: PRU) offers a range of insurance, investment management, and other financial products and services. With a rich dividend, this insurance and investment giant is a very safe idea for conservative investors. Prudential offers its products and services in the United States and internationally.
It operates through five segments:
- PGIM
- Retirement Strategies
- Group Insurance
- Individual Life
- International Business
The PGIM segment offers investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit, and other alternatives, as well as multi-asset class strategies, to institutional and retail clients, as well as its general account.
The Retirement Strategies segment provides a range of retirement investment and income products and services to retirement plan sponsors in the public, private, and not-for-profit sectors. It develops and distributes individual variable and fixed annuity products.
The Group Insurance segment offers:
- Various group life plans
- Long-term and short-term group disability
- Group corporate, bank, and trust-owned life insurance in the United States primarily for institutional clients for use in connection with employee and membership benefits plans
- Accidental death and dismemberment, and other supplemental health solutions
- Plan administration services in connection with its insurance coverages
The Individual Life segment develops and distributes variable life, universal life, and term life insurance products.
The International Businesses segment develops and distributes life insurance, retirement products, investment products, specific accident and health products, and advisory services. The company provides its products and services to individual and institutional customers through its proprietary and third-party distribution networks.
Jefferies has a Buy rating with a $134 price target.
Simon Property Group
Simon Property Group Inc. (NYSE: SPG), a leading real estate company, is a self-administered and self-managed real estate investment trust (REIT). It owns, develops, and manages premier shopping, dining, entertainment, and mixed-use destinations, primarily consisting of malls, Premium Outlets, and The Mills.
The company owns or holds an interest in approximately 196 income-producing properties in the United States, which consist of:
- 93 malls
- 70 Premium Outlets
- 14 Mills
- Six lifestyle centers
- 13 other retail properties in 37 states and Puerto Rico
It also holds an interest in 22 regional, super-regional, and outlet malls in the United States and Asia.
Additionally, it has redevelopment and expansion projects, including the addition of anchors, big-box tenants, and restaurants, underway at properties in North America, Europe, and Asia.
Internationally, the company owns 35 Premium Outlets and Designer Outlet properties, primarily located in Asia, Europe, and Canada. It also has two luxury outlet destinations in Italy.
Piper Sandler has an Overweight rating with a $200 price objective.
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