Are Blue-Chip, Dividend-Paying Stocks Really ‘Safe’?
Big names can feel reassuring, but these companies aren't immune to stock market downturns ... due to outside forces or of their own making. From GE to Hershey, here are four big names that illustrate the point.


For many investors, newbies and veterans alike, there is often an attraction to big corporations. If a company is a household name, and perhaps you even have some of its products in your house, this appears to be a “safe” investment.
Because many of these blue-chip stocks pay dividends, this seems like a win-win situation, especially for retired investors who depend on income. However, as recent history shows, this isn’t always the best idea.
What is a blue-chip stock?
In order to be considered a blue-chip stock, a company typically has to have been in business for a long time, with billions in market capitalization. This type of company is typically one of the leaders in its industry.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Examples include Disney, IBM and Coca-Cola. These companies often issue dividends to shareholders on a quarterly and sometimes annual basis.
So, why shouldn’t all of these top global companies be considered rock-solid investments? The following are four examples of why even well-known companies aren’t always worth the investment.
Often there’s no such thing as a good stock in a bad market.
When things are going well, blue-chip stocks can seem like a stable way to realize market gains. A strong economy generally results in consumers buying from these companies, which maintains — or raises — the stock price and allows investors to keep getting dividends.
But what happens when things stop going so well?
There’s a perception that these well-established corporations will stay strong even during bad markets. But this often just isn’t true.
A great example of this is General Electric (GE). In 2008, GE’s quarterly dividend was 31 cents per share. When the worldwide recession hit, that dropped to 10 cents during 2009’s second quarter. And GE wasn’t the only company that took a hit. All together in 2009, more than half of companies that paid dividends cut them or stopped paying them entirely.
But that wasn’t the full story on GE’s troubles. This massive company, a historic highflier in the market, has been plagued by debt, much of it from underfunded pension plans and a series of poor management decisions.
GE lost over $140 billion in market value in 2017 alone, causing it to be kicked out of the venerable Dow Jones Industrial Average — the index that tracks the bluest of the blue-chip companies — this year. The share price of GE has dropped by over 50% in the past year.
Poor foresight
AT&T (T) is another example of a blue-chip stock that has struggled mightily in recent years. One reason cited for this is the company’s reliance on its pay-TV business, while more and more consumers are cutting cords.
According to the Leichtman Research Group, the U.S. market for pay TV lost around 1.5 million video subscribers in 2017, with a third of them AT&T customers. In this year alone, the value of AT&T shares has dropped nearly 16%.
Fluctuating prices
Companies that make things often have to rely on procuring the right elements to create their products. For instance, without cocoa, Hershey (HSY) wouldn’t be able to make the vast majority of its food items. And when cocoa prices increased from $2,000 to more than $3,000 per metric ton in 2015, this hurt Hershey significantly.
Cocoa prices dropped to less than $2,000 in 2016, but then they went back up to $2,500. Not only are Hershey executives taken on a roller coaster ride with these fluctuating prices, so are their investors. In 2015, Hershey stock hit a January high of $110.66 followed by a November low of $83.82 — a 24% drop. The stock recovered, but Hershey stock has taken about a 20% hit ($93.99 on July 13, 2018) from its January price this year.
Lack of innovation
Corporations can’t stand on name recognition alone, and this is evident with a company like Procter & Gamble (PG), maker of Tide, Crest, Charmin and many other household products.
From 2013 to 2017, P&G’s yearly earnings dropped nearly 20%. P&G has been slower to innovate, still mostly relying on in-store purchases and only recently putting more of an emphasis on e-commerce.
In the past five years, the overall price of the stock has fluctuated between a high of $93.46 on Dec. 26, 2014, and a low of $68.32 on Sept. 10, 2015. That’s a swing of almost 27%.
Why diversification is the key
There is certainly nothing wrong with investing in blue-chip stocks, but you know what they say about putting all of your eggs in one basket. This is why the smartest thing investors — and particularly retired investors — can do is diversify their portfolios to include fewer volatile investments.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Stuart Estate Planning Wealth Advisors are not affiliated companies. Stuart Estate Planning Wealth Advisors is an independent financial services firm that creates retirement strategies using a variety of investment and insurance products. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to safety and security generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 561609
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Craig Kirsner, MBA, is a nationally recognized author, speaker and retirement planner, whom you may have seen on Kiplinger, Fidelity.com, Nasdaq.com, AT&T, Yahoo Finance, MSN Money, CBS, ABC, NBC, FOX, and many other places. He is an Investment Adviser Representative who has passed the Series 63 and 65 securities exams and has been a licensed insurance agent for 25 years.
-
Seven Surprising Reasons Retirees Are Going Back to Work
Sure, money is a big reason to come out of retirement, but it's not the only reason retirees are doing it.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market Today
Wednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial Planner
Holding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
-
Beyond Banking: How Credit Unions Serve Their Communities
Credit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
-
Answers to Every Early Retiree's Questions This Year, From a Wealth Adviser
From how to retire in a crazy market to how much to withdraw and how to spend without feeling guilty, a financial pro shares the advice he's given this year.
-
The Risks of Forced DST-to-UPREIT Conversions, From a Real Estate Expert
Some new Delaware statutory trust offerings are forcing investors into 721 UPREIT conversions at the end of the hold period, raising concerns about loss of control, limited liquidity, opaque valuations and unexpected tax liabilities.
-
I'm a Financial Adviser: You've Built Your Wealth, Now Make Sure Your Family Keeps It
The Great Wealth Transfer is well underway, yet too many families aren't ready. Here's how to bridge the generation gap that could threaten your legacy.
-
Want to Advance on the Job? Showing Some Courtesy and Appreciation Could Help
Two business professors share their insights about the impact of digital communication on the social skills of some in Gen Z and the importance of good manners on the job.
-
From Job Loss to Free Agent: A Financial Professional's Transition Playbook (and Pep Talk)
The American workforce is in transition, and if you're among those affected, take heart. You have the skills, experience and smarts that companies need.
-
A Financial Planner's Top Five Items to Prioritize When Your Spouse Is Ill
During tough times, it's easy to overlook important financial details, but you'll be so much better off if you take care of these things right now.