The Safest 6% Yielding Blue-Chips For A Rich 2022

Summary

• In today's low yield world, safe yield is hard to come by, unless you know where to look.
• Even with the market 32% overvalued, several safe 6% yielding blue-chips are ready to help you retire in safety and splendor.
• LGGNY and PBA are expected to deliver 11.3% CAGR long-term returns, exactly as they've done over the last decade.
• In just the next year, analysts expect them to deliver 15% to 20% total returns, making both a potentially wonderful way to enjoy a rich 2022 and beyond.
• Looking for more investing ideas like this one? Get them exclusively at The Dividend Kings. Learn More »

Galeanu Mihai/iStock via Getty Images

In today's yield-starved world, junk bonds yield 4%, and Vanguard's high-yield ETF just 2.7%.

The 60/40 retirement portfolio, which has been the gold standard for over 30 years, yields just 1.9%.

What if I told you that you could find safe 6% yielding blue-chips, even in today's 32% overvalued market?

What if I told you that these undervalued blue-chips offered not only dependable income retirees can trust in all economic and market conditions, but are also companies that analysts expect to deliver 15% to 20% returns in 2022?

12-Month Forward S&P Bottom-Up Consensus	5225	Forward PE Forecast (12 Months From Now)	Forward Overvaluation Forecast (12 Months From Now)
12-Month Consensus Market Return Potential	9.1%	21.12	25.7%
12-Month Historical Margin-of-Error Consensus Market Return Potential	7.5%	Historical Margin Of Error	1.60%

Click to enlarge

(Source: DK S&P 500 Valuation And Total Return Tool)

That's compared to just 9% for the S&P 500.

Analysts expect these 6% yielding rich-retirement blue-chips to deliver 11.3% long-term market-beating returns. Not just for the next few years, but potentially for decades to come.

Think this sounds too good to be true? Well, my friends, it's always and forever a market of stocks, not a stock market.

And even with the S&P 500 32% historically overvalued according to JPMorgan, such companies do exist.

So, let me show you why Legal & General Group (OTCPK:LGGNY), and Pembina Pipeline (PBA), might be just what your diversified and prudently risk-managed portfolio needs to have a rich 2022, and far beyond.

Legal & General: One Of The Best Insurance Companies You've Never Heard Of

Full Deep Dive (Including Complete Risk Profile)

• Legal & General: One Of The Best 6.5% Yielding Blue-Chips You've Never Heard Of

Legal & General is a UK company meaning zero tax withholdings (the case with all UK corporations.

Reasons To Potentially Buy LGGNY

• safe 6.1% yield (61% safety score)
• 66% low-risk 11/13 SWAN quality insurance company
• 10-year dividend growth steak
• 16% historically undervalued (potentially good buy)
• fair value: $24.50
• 9.0X earnings vs 9.5 to 12 historical
• A stable credit rating = 0.66% 30-year bankruptcy risk
• risk management consensus 85th industry percentile = very good
• 3% to 6% CAGR margin-of-error growth consensus range
• 3.9% CAGR median growth consensus
• 8% to 9% CAGR management growth guidance
• 5-year consensus total return potential: 12% to 17% CAGR
• 12-month total return consensus: 15.4%

Investment Strategy	Yield	LT Consensus Growth	LT Consensus Total Return Potential	Long-Term Risk-Adjusted Expected Return	Long-Term Inflation And Risk-Adjusted Expected Returns
Safe Midstream	6.1%	6.2%	12.3%	8.6%	6.2%
Legal & General	6.1%	3.9%	10.0%	7.0%	4.6%
Safe Midstream + Growth	3.3%	8.5%	11.8%	8.3%	5.9%
REITs	3.0%	7.0%	9.9%	6.9%	4.6%
High-Yield	2.7%	11.0%	13.7%	9.6%	7.2%
Dividend Aristocrats	2.3%	8.9%	11.2%	7.8%	5.5%
Value	2.1%	12.1%	14.2%	10.0%	7.6%
60/40 Retirement Portfolio	1.9%	5.1%	7.0%	4.9%	2.5%
REITs + Growth	1.8%	8.9%	10.6%	7.4%	5.0%
High-Yield + Growth	1.7%	11.0%	12.7%	8.9%	6.5%
10-Year US Treasury	1.47%	0.0%	1.5%	1.0%	-1.4%
S&P 500	1.4%	8.5%	9.9%	6.9%	4.5%
Nasdaq (Growth)	0.7%	11.0%	11.7%	8.2%	5.8%

Click to enlarge

(Source: Morningstar, FactSet, YCharts)

How does 4X the market's yield and equal long-term returns potential sound? All from one of the best insurance companies in the UK?

LGGNY 2023 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

LGGNY 2026 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

• if LGGNY grows as expected and returns to historical mid-range fair value
• then 88% total returns or 9.6% CAGR
• compared to 20% for the S&P 500
• potentially almost 5X the market's consensus returns and a safe 6.1% yield from day one

LGGNY Investment Decision Score

(Source: DK Automated Investment Decision Tool)

LGGNY is as close to a perfect high-yield blue-chip opportunity as exists today. One that offers 4X the market's yield and 4X the risk-adjusted expected returns.

Pembina Pipeline: The Best Monthly Dividend Stock You Can Buy Right Now

Full Deep Dive (Including Complete Risk Profile)

• 6% Yielding Pembina Pipeline Is Best Monthly Dividend Blue-Chip Retirees Can Buy

Like all Canadian corporations, there is a 15% tax withholding in taxable accounts and no withholding in retirement accounts.

Pembina is currently the safest high-yield monthly dividend stock trading at reasonable to attractive valuations.

Reasons To Potentially Buy Pembina

• very safe 6.5% yield (82% safety score)
• 76% low-risk 10/13 blue-chip quality midstream
• 9-year dividend growth steak
• 42% historically undervalued (potentially very strong buy)
• fair value: $52.44
• 8.6X cash flow vs 11 to 14 historical
• BBB stable credit rating = 7.5% 30-year bankruptcy risk
• risk management consensus 69th industry percentile = above-average
• 3% to 6% CAGR margin-of-error growth consensus range
• 5.2% CAGR median growth consensus
• 5% CAGR management growth guidance
• 5-year consensus total return potential: 11% to 17% CAGR
• 12-month total return consensus: 20.1%

Investment Strategy	Yield	LT Consensus Growth	LT Consensus Total Return Potential	Long-Term Risk-Adjusted Expected Return	Long-Term Inflation And Risk-Adjusted Expected Returns
Pembina Pipeline	6.5%	5.2%	11.7%	8.2%	5.8%
Safe Midstream	6.1%	6.2%	12.3%	8.6%	6.2%
Safe Midstream + Growth	3.3%	8.5%	11.8%	8.3%	5.9%
REITs	3.0%	7.0%	9.9%	6.9%	4.6%
High-Yield	2.7%	11.0%	13.7%	9.6%	7.2%
Dividend Aristocrats	2.3%	8.9%	11.2%	7.8%	5.5%
Value	2.1%	12.1%	14.2%	10.0%	7.6%
60/40 Retirement Portfolio	1.9%	5.1%	7.0%	4.9%	2.5%
REITs + Growth	1.8%	8.9%	10.6%	7.4%	5.0%
High-Yield + Growth	1.7%	11.0%	12.7%	8.9%	6.5%
10-Year US Treasury	1.47%	0.0%	1.5%	1.0%	-1.4%
S&P 500	1.4%	8.5%	9.9%	6.9%	4.5%
Nasdaq (Growth)	0.7%	11.0%	11.7%	8.2%	5.8%

Click to enlarge

(Source: Morningstar, FactSet, YCharts)

Pembina isn't just expected to outperform the S&P and aristocrats over time but even match the tech-dominated Nasdaq.

PBA 2023 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

PBA 2026 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

• if PBA grows as expected and returns to historical mid-range fair value
• then 116% total returns or 17% CAGR
• compared to 20% for the S&P 500
• potentially almost 6X the market's consensus returns and a very safe 6.5% yield from day one

PBA Investment Decision Score

(Source: DK Automated Investment Decision Tool)

PBA isn't just the best monthly high-yield blue-chip you can safely buy today, it's one of the best high-yield blue-chips periods, with more than 4X the market's yield and 4X the risk-adjusted expected returns.

Bottom Line: These Safe 6% Yielding Blue-Chips Can Help You Ring In A Rich 2022 And Beyond

(Source: Michael Batnick)

The market has been delivering Buffett-like returns for 12 years now.

It's actually been accelerating in the last three years.

That can't continue forever and at some point, there will be a valuation reckoning.

But in a world of low rates and high inflation, sitting in cash is not an option.

Fortunately, it's always and forever a market of stocks, not a stock market.

Today, Legal & General and Pembina represent some of the safest 6% yielding blue-chips you can buy with the market near record highs.

These blue-chips offer 6.1% very safe yield, and 11.3% long-term return potential, which they've delivered with consistency for the last decade.

Today, PBA and LGGNY represent just the kind of disciplined financial science that can help you take charge of your financial destiny and help you make your own luck on Wall Street.

From everyone at iREIT and Dividend Kings, I want to wish you and yours a safe, healthy, and joyous new year.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of LGGNY, PBA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Dividend Kings owns LGGNY and PBA in our portfolios.

Comments

[Dividend Sensei]

Happy New Year!

I’d like to sincerely thank all my 87,000 followers for an incredible five years at Seeking Alpha. It’s been a privilege and honor to help teach so many people how to take charge of your financial destiny and achieve your long-term financial goals.

If you haven’t already, please follow me to continue getting some of the best and most effective and profitable fundamentals and fact-based investment strategies and ideas on Seeking Alpha.

2022 is sure to be an exciting and profitable year for anyone who remembers to focus on safety and quality first, and reasonable valuation and prudent risk management always.

To learn more about my favorite 6% yielding blue-chip for 2022, as well as how to combine these high-yield blue-chips into a prudently risk-managed portfolio that could deliver $250,000 in inflation-adjusted income for the median retired couple over the next 15 years, read the full version of this article via a 2 week free trial of Dividend kings.

seekingalpha.com/...

Please feel free to direct message me if you have any questions. Also, retirees and veterans are eligible for discounts (please message me if interested).

Thank you for reading and please have a safe, healthy, and joyous new year!

Adam Galas

Senior Analyst, Dividend Kings

[AlanS9]

@Dividend Sensei Thanks for the fine article. I already own Enbridge and have been considering adding Fortis. Do you have any thoughts on Pembina verses Fortis?

[Dividend Sensei]

@AlanS9

12/13 Super SWAN quality but 8% overvalued and just 8% long-term return potential expected because of slow growth.

PBA offers over 11%.

So I'd go with PBA unless you are maxed out on midstream and looking for utilities and FTS becomes undervalued.

[ktran99]

Interestingly, for Reasons to Potentially Buys you have Dividends Growth STEAK for both. Must have written the article on an empty stomach.

[Seatonmanagement]

Hmmm. Not for me. I'll stick with OKE.

[Jacob Marley]

@Seatonmanagement .....because.......??

[Fundflow]

I have been thinking about Pembina for a while but never bought. I think ENB is a better company so I have invested there. Good luck to all!

[BMW7]

What do you think about CEQP PR ?
Cumulative . Non Callable . Preferred . Yielding 8.5%

[Dividend Sensei]

@BMW7

As a dividend growth investor, I don't personally invest in preferred shares because of the lack of growth.

I don't cover CEQP and so can't comment on the fundamental risks to this preferred dividend.

[iamfrommissouri]

Look up Banner Life Insurance class action law suits. Legal and General set up captive reinsurance companies on the channel iislands where the allegedly hid
losses for a decades while paying company management very generous dividends. Banner Life increased the universal life premiums 6-fold to make up for these losses. The Maryland court said that even if the charges of fraud were true (judge for yourself) Legal and General which owns Banner life and William
Penn Life insurance is based in another country (England) and cannot be
sued. The plaintiffs could have protected themselves with a guaranted rider.

[Rickety Logic]

@iamfrommissouri thank you for this key fact/insight.

[jzut]

Take a look at ARR and ORC. Off the lows. Monthly payers. Also REM.

[Dividend Sensei]

@jzut

ORC is an MREIT with a steadily falling dividend since 2014.

ARR has had a steadily falling dividend since 2010.

Total return (including dividends) for ORC since 2013 3.3%.

Without dividends -12.2% CAGR.

For ARR since 2011 0.24% CAGR including dividends.

-15.44% CAGR without dividends.

These two mREITs are the definition of yield traps to avoid.

[jzut]

@Dividend Sensei Yes you are correct. I've had ARR a long time and ORC for a while. Yes I have losses in both. But I added to them on the recent dips and in 2020 when the world ended. The losses I don't care as other stocks I own are doing fantastic.along with their dividends. Right now give me the monthly dividend money. With both it's a pretty penny each month. They are in the IRA. I pointed these out to people who don't own these and want to maybe start a position as they're off the lows.

[shappyj]

Please help me understand what I am missing here. When checking the ticker for LGGNY I see a yield of 3.37%.

[SleepyInSeattle]

@shappyj LGGNY not a good buy, in my opinion.

[Dividend Sensei]

@shappyj

Not sure what source you're looking at.

www.gurufocus.com/...

Its 6%.

[shappyj]

@Dividend Sensei I put the symbol into the seeking alpa search and saw 3.7. But on other sites I see 6%. I cannot explain it. Please try seeking alpha to confirm and thanks!

[NervousNeville]

How about a fund with good dividends? VYM is doing well today. NOBL not bad either

[Dividend Sensei]

@NervousNeville

Those are fine options, but they yield much less.

I actually use VYM, NOBL, and 3 other ETFs in 5 of our 10 model portfolios.

The Simple Portfolios, for those that just want to buy once, hold for a year, and then rebalance.

All of them are doing very well so far.

3% to 3.5% very safe yields, and 15% to 19% CAGR long-term consensus return forecasts.

VYM yields 2.7% and NOBL 2.2%.

And are expected to deliver 14% and 11% long-term returns, respectively.

[emerritt]

I thought that you file a claim on your tax return for credit
back the amounts with held? Do not know the form number. CPA
does this. Please correct me so I can check again with
my CPA. Thanks again David, your evaluations and
articles are some of the best and follow your advice. My to
you and God's blessing for you and your family.
Ed M

[In the interest of Fairness]

@emerritt Under tax treaties between Canada and US, investors can generally get a credit for foreign taxes paid against taxes that are payable domestically. There is a tax reciprocity agreement. I can’t speak to the IRS forms but as a Canadian, this is a regular part of my filing and I know that there is similar recover mechanism against your US taxes. I use Turbotax and likely you have the same function in the US turbotax version :)

[RWilliam]

Thx again good stuff DS. There’s a 5 year trend of lower PE, what catalyst returns the PE higher? Interesting stock with ESG and decarbonization the PE could get lower. Nice 6.5% bond until ab oil crash, which I don’t see.

[Dividend Sensei]

@RWilliam

The historical PE that the price is expected to return to is the modern era PE.

In other words, post-financial crisis all financial stocks saw permanent compression.

Is it likely that PEs stay compressed forever? Though possible, it's not likely.

Are interest rates going lower? Economists expect 2% to 3% 10-year vs 2.4% 2010s average.

Are financial regulations getting stricter? That's not expected either.

Are earnings expected to grow slower? No, because buybacks are strong.

So if interest rates are similar, regulations are similar, and growth rates are similar, why wouldn't PEs return to their modern era average?

[RWilliam]

@Dividend Sensei appreciate the response, I initiated a small position, thx!

It’s not a 1.5 year trend it’s 5 years from the 2016 oil energy crash. As you know midstream has never recovered I’m up due to trading and divs. But actual amlp/mlpa is about half its value while oil has skyrocketed. I think it’s ESG pressure and will not recover. So I’ll have to settle for 9% or so figuring 3% growth plus Div.

Thx DS, enjoy your articles. Happy New Years! GL

[Dividend Sensei]

@RWilliam

AMLP has seen its payout falling steadily.

In contrast PBA, ENB, EPD, MMP, TRP, and all the top quality names have been raising payouts steadily.

2014 was a bubble, so don't expect a return to those valuations.

But I value midstream on the 6-year average (100% industry bear market).

A return to the average valuation during the depths of despair when the industry has never been financially stronger is a pretty high probability/low-risk proposition.

[Andrew Feazelle]

Damn everybody is dumping their IRA money into value. I FOMOed my way into already adding like 40% more of my 2021 BTI position for 2022, over 2 days.

[Lion409]

DS- interesting opportunities , thanx.
LGGNY look attractive but I like my dividend players to pay at least 4 times per year ? 2 is tough to live on.

[jzut]

@Lion409 Yes. I noticed that also. Twice a year. No

[Marocha]

Happy new year DS! What is the best investment today, ENB or PBA?

[Andrew Feazelle]

@Marocha idk probably ENB - they seem more forward thinking. From Morningstar:

Pembina offers a fully integrated “store” to its customers, allowing them to retain full economics over the midstream value chain. Pembina’s current operations performed well in 2020 during the COVID-19 pandemic, thanks to a significant portion of its earnings operating under take-or-pay and fee-based contracts. Unfortunately, its major growth opportunities across LNG (a CAD 4 billion to CAD 5 billion net investment in Jordan Cove LNG and the related Ruby Pipeline repositioning), and its petrochemicals (a CAD 4.5 billion venture with Canada Kuwait Petrochemical Corporation) efforts, were essentially canceled in early 2021, leading to significant write-offs.

To kickstart growth again, Pembina pursued an ultimately failed bid for its Canadian peer, Inter Pipeline, as well as a planned bid for the government-owned Trans Mountain Pipeline sometime in late 2022 or early 2023. Combined, both efforts represent potentially over CAD 20 billion in shareholder capital. These efforts support our view that Pembina's management prioritizes growth via acquisitions over organic development and optimization of the existing portfolio of assets acquired over the years. This prioritization of growth (management has alluded to cash flow growth of 7%+ annually) has hurt returns in recent years, as organic projects tend to offer the highest returns, particularly for bolt-on type efforts.

Beyond the growth-oriented mindset, Pembina has yet to address ESG-related concerns. Canada is expected to charge CAD 170 per ton of carbon emissions by 2030, far higher than most developed countries presently, meaning the threat to Canadian energy firms is more material and immediate than most. Some of Pembina’s oil assets serve oil sands projects, which are some of the highest carbon emission intensity basins that we cover, while its gas assets would see material threats from renewable hydrogen displacing gas-powered electricity generation. Thus, in some ways, the Inter Pipeline and potential Trans Mountain deals are committing Pembina to spend billions on more threatened assets, versus expanding its opportunity set across carbon capture projects such as the recent Alberta Carbon Grid.

Just looking on GURU, PBA has a debt to ebitda of 11. Not sure how accurate that is. I would go to other sites to confirm that. I don't follow this company enough to say why it's 11, like did they just buy another midstream similar to what Morningstar is alluding to?

[Andrew Feazelle]

@andrewfez actually I sort of take back my comment - PBA has a better ESG rating than ENB as published on Morningstar. I still like ENB ramping up high return renewable projects though....

[Dividend Sensei]

@Marocha

PBA is more undervalued and ENB is a much higher quality company.

ENB is expected to deliver about 3% stronger long-term returns and yields 1% more.

That's the one I own a lot more of.

[ChuckXX]

Good morning to all; I own 7,000 shares of PBA and am quite please with it other than you never know what you're going to get with that monthly check-LOL. In other words the currency exchange from Canada flucuates all the time. Lately my amount paid has been drifting down. Now, onto LGGNY, I have a few questions. It being a foreign (Britain) company are there any taxes taken out upfront when they pay the dividend??? Also is this the company that pays the dividend in a very FUNKY way??? Let me explain, if my memory is working they pay a large dividend once a year and a small dividend in the other payment. I think they just pay twice a year. I think that was the reason I didn't buy it before as there was an article written on this company about 4 or 5 months ago. I think that turned off alot of folks from buying it. Hope you will reply.

[Veritas1010]

@ChuckXX,

Hello ChuckXX,

I do not own $LGGNY and I have been looking at $PBA forever never buying, in part because I have substantial stake in $ENB in the midstream sector. I recently opened a small position in $WMB however.

Like the Looney in Canada you’ll face FOREX trashing when the USD gets to top heavy versus the British Pound. My Canadian dividends have suffered the double whammy as I am retired and beyond the age of a sheltered account thus opening me up to fully to the 15% Canadian foreign withholdings tax. That 15% takes over 1% in realized yield, add exchange rate losses and that hurts if your stake is big enough.

As for the U.K. there companies often do the 2X’s a year dividend spread top heavy on one light on another. I used to own $VOD and $SSEZY and they paid out identically as described. U.K. has no foreign withholdings tax which is marvelous, but you will deal with exchange rate mystery payment rates and usually some ADR fees since these companies are usually listed via International banks holding shares in the US. ADR fees can vary tremendously from very little per share (giants like $BTI or $TOT) or to substantially higher for “unsponsored” ADR’s where the company neither offers some offsetting financial support for the US listing and also will not even acknowledge your ownership questions usually. I have seen ADR expenses as high as 14.99% for equities in Finland for example. You have to dig up these costs first as they are not obviously on the foreign companies web site if “unsponsored”. Part of the due diligence routine I have learned by doing.

I own few foreign shares these days beyond Canadian as foreign withholdings taxes can be as high as 40% for some European nations, add exchange rate variances and ADR fees and you’ll scratch your head as to why you bought in the first place!

If your making a lot on foreign dividends the US foreign tax credit of $300/$600 individual- dual will do little to offer succor. You’ll soon be filing IRS Form 1116 and if you are in the 0% dividend class in the US under $80.8k gross income you’ll clawback and carry over very little of your tax credit.

I am not an accountant or tax advisor. I simply am passing along my own experiences here as a sort-of ‘SA public service/due diligence’ awareness issue!

Hope this helps some. By the way I have enjoyed many of your comments across time on SA.

Thank you.

Veritas1010

[ChuckXX]

@Veritas1010 I truly say a "BIG THANK YOU" Veritas 1010. Can I respectfully ask where do you live??? I live in Omaha, Nebraska USA. Your comments are very much appreciated. I think I will take a pass on LGGNY.

[Dividend Sensei]

@ChuckXX

The dollar was falling for most of last year vs the Loony and your dividends went up.

Now rising interest rate expectations have the dollar rising so the payout is dropping.

However, over time CAD/USD is stable and so it balances out.

[Aglio Olio]

@Dividend Sensei Happy New Year! This article must be your shortest piece ever..?
I am full on PBA (thanks to your earlier advices), LGGNY seems to be worth to check indeed, thanks!

[coloroaddog]

I'm already substantially overweighted in midstream. Have to see if there is something with a lower yield that I can pare down. Thank you for the recommendations, as always!