3 blue-chip dividend stocks to consider buying in June

Edward Sheldon believes these three well-known dividend stocks are capable of providing double-digit annual returns in the years ahead.

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Investing in dividend stocks can be a super way to build wealth. With these stocks, investors can potentially pick up both share price gains and income.

Here, I’m going to highlight three blue-chip companies that pay dividends. I think these stocks look attractive as we start June.

A high-yielder

First up is banking powerhouse HSBC (LSE: HSBA). Out of all the UK banks, this is the only one I’d personally consider investing in.

Today, HSBC is focusing heavily on Asia and wealth management. So I think it’s far more scalable than some of the other banks (like UK-focused Lloyds).

As for the dividend yield, it’s high. For FY2023, HSBC paid out 61 cents per share to investors. That translates to a yield of about 7% at the moment.

One major risk here is economic weakness in China. Another is major shareholder Ping An Insurance selling down its stake. Both of these issues could cause some volatility in the share price in the near term.

With the stock trading on a low P/E ratio of just seven though, I think it could provide healthy returns in the long run.

A sleep-well-at-night stock

Next, we have consumer goods giant Unilever (LSE: ULVR). Now, the dividend yield here is not the highest out there. Currently, it’s around 3.5%.

But I think there’s potential for high total returns (share price gains plus dividends) with this stock. Recently, Barclays put a 5,200p price target on Unilever. If the stock was to hit that level over the next 12 months, investors could be looking at a total return of over 25%.

I hold Unilever in my own portfolio and one reason for this is that it’s a ‘sleep-well-at-night’ stock. It’s far less volatile than the market as a whole, meaning it provides stability for my portfolio (which is more growth-focused).

It’s worth pointing out that today, social media’s having a major impact on consumer preferences. So there’s no guarantee that Unilever brands such as Dove and Hellmann’s will remain popular in the future.

With a new, highly-driven management team at the helm however, I’m optimistic about the company’s prospects.

A dividend growth company

My last pick is Marks and Spencer (LSE: MKS). A lot of dividend investors are probably ignoring this stock right now as its yield’s quite low.

I think ignoring it could be a mistake though. Recently, brokers have been increasing their share price targets on the back of strong full-year results from the company. For example, analysts at JP Morgan increased their target price to 360p from 330p. That new target’s 19% higher than the current share price.

Meanwhile, the company’s increasing its dividend payout at a rapid rate. For this financial year, analysts expect a payout of 5.6p per share – 87% higher than last year’s payout. Next financial year, they expect the payout to rise another 25% to 7p (a yield of 2.3%).

If dividends keep rising like this, investors could be in for some big cash payouts in the future.

The cost-of-living crisis in the UK is a risk here, of course. However, after its recent transformation programme, I think the company and its shares are poised to do well in the years ahead.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has positions in Unilever Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, Lloyds Banking Group Plc, and Unilever Plc. HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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