Two investing truths have proven timeless:

  • Investing in the biggest, strongest companies -- known as blue chip stocks -- is a great way to earn solid returns with lower risk of loss.
  • The best stocks also have a track record of market-beating total investment returns.

Investors wanting to balance lower risk of loss and steady returns should look at blue chip stocks that pay dividends. Let's take a closer look at these stocks that offer the best of both worlds, meeting the blue chip standard as a stalwart company and paying a strong dividend to deliver the best returns. 

Blue chip dividend stocks offer the best of both worlds: income and stability.

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What are blue chip stocks?

In the strictest sense, a blue chip stock is one that's included in the Dow Jones Industrial Average (DJINDICES:^DJI). This index, made up of 30 of the biggest, strongest U.S. companies, is often referred to as the blue chip index.

A broader, better definition of a blue chip stock is "a well-known, high-quality company that is a leader in its industry." The "blue chip" descriptor comes from the game of poker, in which the blue chip denominates the highest dollar value.

With the Dow Jones index having only 30 stocks, many high-quality companies are excluded. Warren Buffet's Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), which has a market capitalization of nearly $700 billion and a multi-decade track record of increasing profitability, is not included in the Dow. It's still an easy argument that this is a blue chip company, as is Amazon (NASDAQ:AMZN)Facebook (NASDAQ:FB), and a number of other market leaders. 

Combining blue chip stock quality with dividends

Not every stock that can be considered blue chip pays a dividend. Younger companies, such as Amazon and Facebook, still have plenty of valuable opportunities to invest profits back into their businesses to accelerate growth. Others, such as Berkshire Hathaway, have proven track records of earning high returns by reinvesting their company's profits.

But many of the best blue chip companies are also those that pay dividends. Some are Dividend Aristocrats, meaning that they have increased their dividends consistently for at least 25 consecutive years. Other blue chip companies are Dividend Kings, which have increased their dividends for a half-century or more.

Regardless of whether a blue chip stock has a rapidly growing dividend, the combination of blue chip status and dividend payments can be rewarding for investors.

Best blue chip dividend stocks of 2021

Let's take a close look at some of the top blue chip dividend stocks:

Company Name Market Capitalization Dividend Yield  2020 Total Return
Apple (NASDAQ:AAPL) $2.06 trillion 0.7% 82%
Corning (NYSE:GLW) $37 billion 2.1% 28%
Nike (NYSE:NKE) $212 billion 0.8% 41%
NextEra Energy (NYSE:NEE) $143 billion 2% 30%
Mastercard (NYSE:MA) $360 billion 0.5% 20%

Data source: YCharts. Data current as of June 3, 2021. Total return equals share price appreciation plus dividend paid.

1. Apple

Apple investors have enjoyed immense returns during the past two decades as the company has risen to become one of the biggest and most profitable. Apple's brand as the largest consumer electronics provider makes it a blue chip stock and one of the most reliable companies to own for the long term.

The foundation of Apple's success is the iPhone, which has enormous user loyalty and generates more than half of Apple's profits. Much of the company's growth in services is derived from its massive iPhone user base since customers use their smartphones to stream music and movies, play video games, store data, and access media content from thousands of third-party publishers in the App Store.

Apple is in an enviable position going forward, too. The deployment of 5G mobile networks in many markets is likely to boost sales of the iPhone 12, which is the first iPhone with 5G. 

AAPL Dividend Chart

Data by YCharts.

Apple's blue chip status, paired with its dividend growth rate, is an increasingly attractive combination. The stock's dividend yield may be somewhat low, but the company's dividend payout comprises less than 20% of Apple's cash flows. Apple has been raising its dividend every year since it was instituted in 2013, meaning that continued dividend growth is likely. When looking for blue chip stocks that dole out regular and rising dividend income, Apple should be a top choice.

2. Corning

Corning is a household name because of its cookware -- which is now made by another company under a licensing agreement -- and has been around for more than a century. The company currently makes the vast majority of its money by supplying glass and ceramic materials for the production of a wide range of industrial, consumer, and life science products. Corning makes super-tough glass used for TVs, monitors, and mobile devices; optical communications cables; emissions control equipment; and a variety of specialty products that can handle extreme temperatures, harsh environments, and rough handling while maintaining their performance properties. Corning ranks well as a blue chip stock in the basic commodities market.

Corning's dedication to research and development has kept it ahead of its competitors, and the importance of its products isn't likely to fade. More screens -- tough ones that can hold up while delivering a crystal-clear experience -- are being deployed in increasingly more products, which should significantly benefit this blue chip company.

GLW Dividend Chart

Data by YCharts.

Since 2011, Corning's growing cash flows have enabled the company to increase its dividend by 380%, and the stock price has appreciated by nearly 220%. Corning's dividend yield is around 2% at the time of this writing, and the company's still-growing earnings comfortably cover its dividend payouts.

3. Nike

One of the most powerful and recognizable brands in the world, Nike has been a blue chip stock for decades. Clothing bearing the Nike "swoosh" logo is sought after by consumers around the globe, and with the global middle class growing rapidly, Nike is the elite brand in athletic footwear and apparel. Even the COVID-19 pandemic only put a temporary drag on Nike's upward momentum since spending on the company's products recovered quickly.

NKE Dividend Chart

Data by YCharts.

Not only does Nike's brand power -- and the pricing power that comes with it -- make the company a true blue chip. In the third quarter of its fiscal 2021, Nike reported year-over-year digital sales growth of 59% and direct-to-consumer sales that were 20% higher.

This increasingly efficient distribution model is likely to enable the company to continue to raise its dividend payout. Nike's dividend yield is currently 0.8% per year, but the company has a long history of annual payout increases.

4. NextEra Energy

NextEra Energy isn't your typical utility stock. The company is a growing producer of energy -- much of it generated by renewable sources -- that it sells and transfers to utility companies in other markets. The steady demand for electricity that underpins its business, combined with growth in demand for renewable energy, gives NextEra a premium valuation and blue chip status.

NextEra is one of the largest utility companies in the U.S. and among the largest producers of renewable energy in the world. The company benefits partly from being headquartered in Florida, one of the fastest-growing states in terms of both population and business development.

NEE Dividend Chart

Data by YCharts.

NextEra's share price has appreciated by 580% and its dividend payout has increased by 180% over the past 10 years -- some of the best results of any utility company. While the company's dividend yield of 2% is comparatively low for its peer group, that's a reflection of the company's premium stock price and shareholders' expectations that the company will continue to thrive.

5. Mastercard

Payment processing giant Mastercard is a blue chip company in the digital payments space. As one of the most recognizable global names in electronic payments, Mastercard has massive network effect advantages that enable it to maintain its dominant marketplace position. With another billion people set to join the global consumer class over the next decade, and as the transition to electronic spending accelerates worldwide, Mastercard still has plenty of opportunities to expand its payment processing network.

MA Dividend Chart

Data by YCharts.

Mastercard is ignored by many dividend investors for the simple reason that the dividend yield is low -- only around 0.5% at the time of this writing. However, the company boasts a remarkable record of expanding its dividend payout -- quarterly dividends have increased by 2,800% over the past 10 years.

Should you buy blue chip dividend stocks?

Investing in blue chip companies that pay dividends can significantly increase your wealth over time. Although the stock market constantly gains and loses value, these stocks often exhibit below-average volatility while delivering market-beating returns over long time horizons. Blue chip dividend-paying stocks are strong additions to portfolios of all kinds, especially for investors seeking stability and income.