Investors looking for safe and reliable source of income are encouraged to consider blue chip stocks. Companies that have earned this title are those with entrenched business models and competitive advantages that set them apart from their peers. Stocks in this category often pay safe and reliable dividend yields as well.

This article will examine three of our favorite blue chip names that provide secured income, including:

• Bristol-Myers Squibb (BMY)
• LyondellBasell Industries (LYB)
• Verizon Communications (VZ)

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Bristol-Myers

Bristol-Myers is a leading healthcare company that focuses on cardiovascular and anti-cancer therapeutics.

The company has a number of market-leading products that has propelled the company’s business forward.

For example, Eliquis has become the top oral anticoagulant in several regions over the past few years and should generate revenue of close to $10 billion for 2021. Opdivo, which treats cancers such as advanced renal carcinoma, saw higher market share gains in the most recent quarter and produced nearly $2 billion in sales.

Bristol-Myers hasn’t relied just on its own pipeline to produce growth. The company acquired Celgene near the end of 2019, bringing Revlimid into the fold. The treatment for multiple myeloma had sales north of $3 billion the most recent quarter, making it Bristol-Myers’ top grossing product.

In addition, Bristol-Myers has more than 60 products in phase 1 or phase 2 trials along with more than 20 products in phase 3 trials. While not all of these trials will produce products with high peak sales numbers, Bristol-Myers’ pipeline is more extensive today than it was just a few years ago. At the very least, the potential for blockbuster products has been increased given the sheer size of the company’s pipeline.

Including a 10.2% increase for the upcoming February 1 payment, Bristol-Myers has raised its dividend for 15 consecutive years. Dividend growth has been much better recently and shares yield 3.3% today. The projected payout ratio for 2021 is just 26%, which, combined with steady growth in its top-grossing products and a vast pipeline working its way through trials, should mean many more years of dividend growth for Bristol-Myers.

LyondellBasell

LyondellBasell is a leading plastic, chemicals, and refining company. The company is the largest producer of polypropylene compounds in the world. It is also the largest licensor of polyolefin technologies.

The company’s offerings are used in a variety of industries that require advanced solutions, such as food safety, water purity, electronics, and appliances.

This broad demand for advanced products requires LyondellBasell to invest heavily in research and development. The company has done this to such a great extent that it holds more than 5,500 patents in its portfolio, giving the company a large assortment of intellectual property.

LyondellBasell has also utilized acquisitions to help grow its business. This includes the $2.3 billion purchase of A. Schulman in 2018, which doubled the company’s compounding business. The purchase also granted LyondellBasell access to markets that it didn’t have a presence in, such as appliances and agriculture.

The stock offers a very high yield of 4.4% at the moment and the company has raised its dividend for 10 consecutive years. With a typical payout ratio in the low 30% range, it is likely that shareholders of LyondellBasell will continue to see a dividend raise going forward as well.

Verizon

Verizon is a top wireless carrier in the U.S., of which there are just a handful remaining following a series of mergers. The limited competition means that Verizon only has to concern itself with a few peers.

The company’s chief competitive advantage is that its service area covers nearly the entirety of the country. Customers are almost completely assured that their service won’t be dropped.

This is one reason why Verizon has such a low churn ratio. Less than 1% of customers changed providers in the most recent quarter. In fact, Verizon saw a massive influx of new customers as net additions totaled 699,000 for the period.

Part of the reason for this estimate-beating level of additions was Verizon’s 5G service. The company was the first of the major carriers to turn on 5G, putting it at the forefront of bringing this service to market. Verizon has millions of 5G-ready devices already under management.

Verizon has been the definition of a slow and steady dividend grower over the years as the dividend has a compound annual growth rate of just 2.6% over the last decade. That said, the stock has a robust dividend yield of 4.8%. The projected payout ratio for 2021 is 48%, which would be Verizon’s lowest payout ratio is more than a decade. Dividend growth might not be the most exciting, but the yield is generous and the dividend appears to be well covered.

Final thoughts

We believe that investors looking for stocks providing safe and secure dividend income should focus on those that lead their respective industries. These companies tend to have characteristics that separate themselves from the competition. This often leads to dividend growth and high yields.

Bristol-Myers, LyondellBasell, and Verizon are three such names. These companies have strong business models, high yields, and low projected payout ratios, making each name a potentially strong purchase for those looking for well-supported yields.