3 High-Dividend Blue-Chip Stocks That Have Been Around at Least 100 Years

This article examines 3 high-quality blue-chip stocks with 100-plus-year operating histories and dividend yields of more than 3%.
By Ben Reynolds ,

Have you heard the financial disclaimer: "Past performance is no guarantee of future results?"

It's true to a degree. When analyzing a business, however, I'd argue that past performance matters a great deal. Let's look at two hypothetical businesses, we will call one "A" and the other "B."

Business "A" has been selling branded consumer products for 104 years. It has increased its dividends for 42 consecutive years. It has a large market cap and is expanding into global markets.

Business "B" was founded two years ago. It hopes to build a portfolio of branded consumer products. The company pays no dividends and only operates in the U.S.

I work hard for my money. I don't want to gamble it away on "maybe" investments like business "B." Business "A" has the stronger operating history. It has a proven record of success. It has built up a strong competitive advantage over the last 100 years. I would pick business "A" to invest in every time.

In that case, past performance matters. It doesn't guarantee future success, but it certainly makes it more likely.

There are currently 34 blue-chip stocks with 100-plus-year operating histories and high dividend yields of more than 3%. This article takes a look at three of my favorite blue-chip high-dividend stocks.

1. Target (TGT) - Get Report

Target was founded in Minnesota in 1902. Since that time the company has grown to become the third-largest discount retailer in the U.S. based on its $42.19 billion market cap. The only two larger discount retailers are Costco and Wal-Mart Stores.

Target has a long history of success. The company has paid increasing dividends for 45 consecutive years. This makes Target one of just 50 Dividend Aristocrats, stocks with 25-plus years of consecutive dividend increases in the S&P 500.

The company has managed to be successful for so long due to its strong competitive advantage. Target has a scale-based competitive advantage. The company can pressure suppliers to offer low prices. In addition, the company has a (well-deserved) reputation for being cleaner and having more "trendy" merchandise than larger competitor Wal-Mart.

Despite its history of success, the last few years have been difficult for Target.

The company botched its planned expansion into Canada. This cost the company around $2 billion. But that's not the only mistake the company has made recently.

Target and Costco are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells TGT or COST? Learn more now.

Target also had a massive data breach that turned over its customer's credit card information. This negatively affected sales as well and damaged the company's reputation.

Despite these mistakes, Target managed to grow its earnings-per-share 16.5% in its most recent quarter. Better yet, online sales grew 23%. Target is back on track, but the market hasn't seemed to realize that yet.

Target stock currently trades for a price-to-earnings ratio of just 13.3. The company's forward price-to-earnings ratio is even lower at 12.5. And the company is offering investors a dividend yield of 3.4%.

Target offers investors a compelling mix of growth, safety, and dividends. The company is currently a favorite of The 8 Rules of Dividend Investing.

2. Wells Fargo (WFC) - Get Report

When one thinks of a blue-chip stock, one often thinks of large, dominant companies with long operating histories and above- average dividends. That's Wells Fargo.

The company is very large; Wells Fargo has a $238.35 billion market cap. In fact, Wells Fargo is the 11th-largest publicly traded corporation on U.S. exchanges based on its market cap.

Wells Fargo was founded in 1852 in New York City by (you guessed it) Henry Wells and William Fargo. Wells Fargo was not the only financial powerhouse these two founded. Wells and Fargo also founded American Express.

Fast forward to today. Wells Fargo is the most stable and profitable of the U.S. mega banks. The company has realized profits of $5 billion or more every quarter ... for 14 straight quarters.

Wells Fargo is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells WFC? Learn more now.

Only JPMorgan Chase can come close to matching this recent streak of success (though it falls short, posting quarterly losses in 2013).

Wells Fargo is one of Warren Buffett's highest-yielding holdings. It is also his largest holdings, making up 19.8% of his portfolio. Buffett is known to invest in high-quality businesses that he likes to hold for long periods of time. Wells Fargo is Buffett's highest conviction pick based on its size in his portfolio.

There's plenty to like about Wells Fargo at current prices. The company is trading for a price-to-earnings ratio of 11.5. Wells Fargo's forward price-to-earnings ratio is even lower at 10.7.

The company has much to offer dividend investors as well. Wells Fargo currently has a 3.3% dividend yield. It's payout ratio is low at just 36.4%, giving the company plenty of room to increase dividends (or at least keep them steady), even if earnings temporarily dip.

3. Boeing (BA) - Get Report

Boeing was founded in 1916, making the company exactly 100 years old this year. To put that into perspective, the Wright Brothers made their first flight in 1903. Just 13 years later, Boeing was founded.

The company currently has a market cap of $80.99 billion. This makes Boeing the second-largest publicly traded aerospace and defense corporation in the world. Only United Technologies is (slightly) larger with its $84.69 billion market cap.

Despite being a well-established business, Boeing has realized tremendous success over the last several years. The company has grown core earnings-per-share from $2.51 in 2004 to $7.72 per share in 2015. That comes to a compound annual growth rate of 10.8% a year.

The company operates in two primary segments:

  • Commercial Airplanes (64.4% of first-quarter revenue)
  • Defense, Space, & Security (35.6% of first-quarter 2016 revenue)

Boeing's primary competitor in its Commercial Airplanes segment is Airbus. The lack of competition in the industry is due to high barriers to entry. The manufacturing ability, knowledge, and regulatory burden of building commercial airplanes is tremendous. This inhibits competition and creates an oligopolistic market, which is good for investors in Boeing.

The company is currently trading for a price-to-earnings ratio of 17.2. The company's forward price-to-earnings ratio is even lower at 13.4. Boeing is far cheaper than the average S&P 500 stock; the S&P 500 is currently trading for a price-to-earnings ratio of 24.3.

In addition, Boeing has a solid dividend yield of 3.4%. The company makes a compelling choice for investors looking for exposure to both the defense and commercial airline industries.

This article is commentary by an independent contributor. At the time of publication, the author was long TGT and WMT.

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