Blue Chip Dividend Stocks for Your Retirement Portfolio

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The world is currently going through several crises at the same time. There’s decades-long high inflation hurting everyone’s income and wealth in real terms, there’s a global energy shortage, and there’s the ongoing war between Russia and Ukraine.

In these uncertain times, investors may want to go for proven companies that have established diversified business models and shown they have what it takes to stem a crisis.

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In this report, we will therefore highlight three Blue Chip Stocks that have worked well in the past, through all sorts of crises – including the pandemic, the Great Recession, the bursting of the dot.com bubble, etc. Their ability to pay growing dividends come what may will make it easier for investors to weather the current difficult macroeconomic environment.

  1. Kimberly Clark

Kimberly-Clark Corporation (NYSE: KMB) is a consumer goods company that operates globally and sells products such as paper towels, facial tissues and diapers. Its brands include household names such as Kleenex, Huggies and Depend.

Demand for these products does not depend on the strength of the economy or commodity prices, which is why Kimberly-Clark is able to generate highly reliable sales regardless of the macroeconomic environment.

The flip side is that KMB is not experiencing strong business growth, but through expansion into international markets, mergers and acquisitions, and takeovers, Kimberly-Clark has nonetheless managed to deliver significant growth in earnings per share. in the past, although its earnings per share growth rate has not been excessively high.

We believe the company should be able to grow its earnings by around 5% per year on a per share basis going forward, which would be relatively comparable to its past growth.

At current prices, Kimberly-Clark offers a dividend yield of 4.1%, which is higher than the average yield the company has traded with over the past decade. Its yield is also well above the broader market’s sub-2% dividend yield. Kimberly-Clark has managed to grow its dividend for 50 consecutive years, making it a dividend king and an ultra-reliable dividend growth stock.

Between its attractive dividend yield and some earnings and dividend growth, Kimberly-Clark has a good chance of delivering a high single-digit annual total return, in our view, which is attractive when it can be generated by a non-cyclical and reliable company. like KMB.

  1. Illinois Tool Factory

Illinois Tool Works Inc. (NYSE: ITW) is an industrial products company that, despite the cyclical nature of many other industrial companies, has an excellent track record of dividend growth. Illinois Tool Works has managed to increase its dividend for 58 consecutive years, which also makes it a dividend king.

Earnings per share have more than doubled over the past decade, although there have been some minor ups and downs. In 2020, for example, earnings declined compared to 2019 due to the impact of the pandemic. But since the dividend was still easily hedged, there was no significant risk of a dividend cut – which is also true for past crises, like the Great Recession.

With ITW shares having fallen over the past year, Illinois Tool Works is now trading with a dividend yield of 2.8%. This is easily more than can be had in the broader market, and it also compares favorably to the dividend yield the company itself has traded at in the past, as its dividend yield was mostly around 2% over the past decade.

Illinois Tool Works has increased its dividend by 12% per year for the past five years. While we believe dividend growth will slow somewhat going forward, even the expected mid-single-digit dividend growth rate is very strong when combined with a dividend yield of nearly 3%, as this expected to deliver high single-digit annual growth. returns before accounting for valuation changes.

Illinois Tool Works has never been a particularly cheap company, likely due to its compelling long-term track record. Currently, stocks are trading at a slight discount to how they have been valued, on average, over the past five years. This could set the tailwinds for a multiple expansion for its total returns over the next few years.

  1. Domestic fuel gas

National Fuel Gas Company (NYSE: NFG) is a lesser-known diversified energy company that isn’t too big, valued at $6 billion today. Nonetheless, the company has a very compelling dividend growth track record, having increased its dividend for 52 consecutive years, which also makes it a Dividend King.

The Company is active in exploration and production, pipelines and storage, energy marketing, and it also has utility businesses.

Although it is an energy company, its diversification into different businesses allows it to be more resilient than pure upstream oil and gas companies, for example – which is one of the reasons why National Fuel Gas has managed to raise its dividend so reliably for decades, despite volatility in commodity markets.

Thanks to the high prices of natural gas, which are explained by the global energy shortage and the high exports to markets such as East Asia and Europe, National Fuel Gas is very profitable in the environment. current.

That’s why earnings per share are expected to rise more than 40% this year, to more than $6, from $4.30 in 2021. Over the past decade, National Fuel Gas has increased its earnings per share by around 50%, although there have been ups and downs over the years.

But thanks to a low dividend payout ratio – just 31% based on current estimates for this year – the company has been able to maintain and increase its dividend very reliably, even though in some years profits have fallen from the previous year. .

Based on current prices, National Fuel Gas offers a dividend yield of just over 3% today, about double what can be obtained in the broader market.

Combined with a historic mid-single-digit dividend growth rate, high single-digit annual returns seem very achievable in the long term for this little dividend king.

In the short term, however, total returns could be higher. Based on current estimates, National Fuel Gas is trading at a very undemanding earnings multiple of just 10.

Given that NFG used to trade at an earnings multiple in its mid-teens, on average, in the past, there is considerable upside potential for its shares, which could lead to further gains on the share price for the foreseeable future.

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