3 Blue-Chip Dividend Stocks for Long-Term Returns

For income investors relying on dividends, blue-chip stocks offer relative safety and consistent income over the long term. With persistent inflation, investors may want to opt for proven companies that have established, diversified business models.

Below we discuss three long-term blue-chip stocks that have raised their dividends each year for over 10 years, have current yields above the S&P 500 average, and should continue to increase their dividends for years to come.

Humming Along

Humana HUM is one of the largest private health insurers in the U.S. with a focus on administering Medicare Advantage plans. The firm has built a niche specializing in government-sponsored programs, with nearly all its medical membership stemming from individual and group Medicare Advantage, Medicaid, and the military's Tricare program.

At the end of 2023, the company had approximately 16.8 million members in medical benefit plans, as well as approximately 4.9 million members in specialty products.

On January 25, Humana released its fourth-quarter and full-year 2023 results. For the quarter, the company reported revenues of $25.7 billion and adjusted earnings per share loss of -$0.11, which compared to revenue of $21.3 billion and adjusted EPS of $1.97 in the same quarter of 2022. The weaker fourth-quarter 2023 figures were driven by higher benefits expenses, especially the increase in Medicare Advantage operating costs.

Still, 2023 was another year of growth for the company. For the full year, Humana reported total revenues of $106.4 billion and adjusted EPS of $26.09, compared to $92.8 billion in revenue and adjusted EPS of $25.88 in 2022.

The company issued lower 2024 earnings guidance. Adjusted EPS is estimated to be around $16.00, suggesting a significant decline from the 2023 figure of $26.09. However, the benefit ratio of the Insurance unit is expected to stay around 90% for 2024. In addition the company anticipates that its initiatives for margin recovery will contribute to an increase of $6 to $10 per share in adjusted EPS by 2025.

Humana has grown earnings by 14.8% per year over the past decade and -2.2% over the past five years. We expect earnings to increase by 12% per year for the next five years, based on the expected dip in 2024.

The company has been able to increase its yearly dividend payout for 12 consecutive years. Over the last five years, the average annual dividend growth rate was 19.2%, meaning that the dividend payout of Humana has doubled over this period. 

HUM stock currently yields 1.1%.

16 Consecutive Dividend Hikes

Comcast Corp. CMCSA is a media, entertainment and communications company. As of first-quarter 2023, Comcast began reporting in two key business segments: Connectivity & Platforms (Residential Connectivity & Platforms and Business Services Connectivity), and Content & Experiences (Media, Studios, Theme Parks).

Comcast reported its Q4 2023 results on January 25. For the quarter, revenue climbed 2.3% to $31.3 billion, while adjusted EPS increased 2.4% to $0.84. CMCSA generated quarterly free cash flow of $1.7 billion. The Connectivity & Platforms segment revenues rose by 0.5% to $20.4 billion and adjusted EBITDA growth was 3.1% to $7.6 billion with the help of adjusted EBITDA margin expansion of 1.3% to 37.1%.

For the full year, revenue was essentially flat at $121.6 billion, while adjusted EBITDA rose 3.2% to $37.6 billion, and adjusted EPS rose 9.3% to $3.98.

Share repurchases are a meaningful driver of the company’s EPS growth. In 2023, Comcast bought back $11 billion worth of shares at ~$41.92 per share. The company started a new $15 billion share repurchase program. Comcast also increased its dividend by 6.9%, equating to an annual payout of $1.24.

The cable industry is impacted by the nationwide cord-cutting trend, as some customers are ditching traditional Pay-TV. So far, Comcast has been able to withstand this trend through growth from its other businesses. Its balance sheet remains solid with a consolidated net leverage ratio of 2.3x at the end of 2023.

Comcast has had 16 consecutive dividend increases. This fast dividend growth was made possible through solid earnings growth and with a safe dividend payout ratio. Its dividend is well-covered by earnings and cash flows. Comcast is one of the largest players in the entertainment industry. 

CMCSA stock currently yields 3.2%.

Power Up Your Portfolio With a Yield Over 4%

The AES (Applied Energy Services) Corp. AES was founded in 1981 as an energy consulting company. The corporation now has businesses in 14 countries and a portfolio of approximately 100 power plants and wind and solar farms. AES produces power through various fuel types, such as gas, renewables, coal, and oil/diesel. The company has over 34,000 Gross MW in operation. In 2023, AES produced nearly $13 billion in revenue.

The company has a long history of steady growth. In the 2023 fourth quarter, AES reported adjusted diluted EPS increased by 5.4% to $1.76 for 2023. Leadership initiated 2024 guidance for adjusted EPS, expecting $1.87 to $1.97 for the full fiscal year. Additionally, the company reaffirms its expectation it can grow EPS on average 7% to 9% through 2025 from a base year of 2020. It also raised its annual EPS growth target to 7% to 9% (from 6% to 8% previously) from 2023-2027.

Future growth will be derived mainly from constructing and acquiring new energy projects; AES currently has a backlog of 12.3 GW of renewables. The company expects to complete the majority of this backlog of projects over the next three years, but as it continues expanding, new projects could push this date out. On a positive note, AES has no planned equity issuance until at least 2026.

Management targets 10% CAGR in U.S. Utilities rate base and is also forecasting 7% to 9% annual adjusted EPS growth through 2027.

AES has increased its dividend for 11 consecutive years, and the stock currently yields 4.3%.

At the time of publication, Ciura had no positions in any stocks mentioned.