Blue-chip stocks are known and admired for their consistency. Like their eponymous poker chips, these companies provide dependable revenue and earnings. They’re also known for paying reliable dividends that offset stock price movement that is usually in line with the market.
This stability, however, means you rarely hear the words blue-chip stocks and all-time lows mentioned in the same breath. The stocks on this list are not at “all-time” lows, but they are trading at a substantial discount.
Each of these stocks presents speculative investors with a risk-reward scenario. The risk, of course, is that sometimes stocks are cheap for a reason. And there’s no assurance that these stocks won’t drop further if the economy weakens further.
But the reward is that when investors look to deploy the cash, that’s on the sidelines, low-priced blue-chip stocks like the three mentioned here will be among their first choices.
For many years, AT&T (NYSE:T) was synonymous with blue-chip stocks. That status changed as the company sold off its WarnerMedia division in April 2022.
The company had wandered far afield from its core business and had a hefty amount of debt to show for it.
But that spin-off came at the expense of the company’s dividend, which was sliced in half when the spin-off of WarnerMedia was complete.
Many investors were concerned that the company’s focus on paying down debt in a rising interest rate environment would lead to further erosion of its dividend.
So far, that doesn’t appear to be the case. Despite higher interest rates, the company’s interest expense declined last year from $6.7 billion to $6.1 billion. And the company reduced its net debt by $24 billion.
Plus the company is exploring the sale of its cybersecurity business, which will further unwind the business. Combine that with an expectation for $16 billion in free cash flow for 2023 and it appears that the dividend will be supported.
T stock is up nearly 10% in the last year but is still 25% lower than it was five years ago. Retaining its dividend will go a long way to restoring investor confidence.
Altria Group (NYSE:MO) stock is down over 30% in the last five years and over 17% in the last year alone, which has investors concerned about the security of the company’s dividend which currently has an impressive yield of 8.45%.
But much like AT&T that has a dividend with a yield of over 5% as well, investors must be concerned about falling into a yield trap.
The percentage of Americans who are smoking continues to decline and the growing acceptance of cannabis as a socially acceptable alternative is a threat even as Altria continues to pivot to alternative tobacco products such as vaping pens.
For now, however, this doesn’t appear to be having much of an impact on Altria’s revenue and earnings. The latter is expected to grow at around 7.9% over the next five years.
That bodes well for the dividend, which is a hedge against inflation, And it makes MO stock a good value trading at around 13x earnings and near the bottom of its 52-week range.
Among the blue-chip stocks on this list, 3M (NYSE:MMM) is the biggest loser by share price. 3M stock is down a whopping 52% in the last five years.
It’s also down 32% in the last 12 months and 14% in the last quarter alone. For shareholders, the core issue is well known. The company is a defendant in several lawsuits which is serving as an anchor on the stock.
But the recent settlement by Johnson & Johnson (NYSE:JNJ) should be a reminder to investors that eventually there will be a settlement. Once the company settles, investors will know how much in billions, likely paid over several years, 3M will have to pay.
At that point, investors will notice the company is taking steps such as a share buyback program, layoffs, drawing down inventory, and adjusting prices. All of which should support the dividend now and be a benefit to the bottom line.
But when that happens, MMM stock will already be off these historic lows. It’s a bold time to buy, but it may be the right one.
On the date of publication, Chris Markoch had a LONG position in MMM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.