It’s worth noting that blue-chip stocks go through their own bull and bear phase. Nvidia (NASDAQ:NVDA) was under-performing until October 2022. The massive rally in the last three quarters has more than compensated for the bear phase.

With strong fundamentals, several other undervalued blue-chip stocks are worth considering for the long-term even as the markets trend higher. It’s difficult to determine the rally timing for these blue-chip stocks. However, whenever sentiments reverse, total returns will comfortably best index returns and inflation.

Three of the best blue-chip stocks to buy are based on the forward price-earnings ratio. Further, these stocks have an attractive dividend yield, ones that will sustain and potentially grow in the coming years.

Besides the valuation factor, let’s look at business specific factors to be bullish on these names.

Rio Tinto (RIO)

Rio Tinto (NYSE:RIO) is a massively undervalued stock trading at a forward price-earnings ratio of 8.2 and offering a dividend yield of 7.68%. Besides the valuation factor, I like the fact that Rio is creating a diversified portfolio of industrial commodities. The focus is on metals positioned to benefit from the global energy transition.

I believe that Rio is well positioned to become the next copper giant. The company has strategically entered in to a joint venture with Codelco to explore the assets in Agua de la Falda. Further, in order to meet the increasing demand for copper, Rio aims at using cutting edge technologies. The idea is to extract metals from assets which had been discovered years back but were difficult to mine.

It’s worth noting that Rio Tinto also has stakes in some of the best assets such as Kennecott mine in Uttah, and Escondida in Chile. Higher production and potentially higher price realization in the coming years will positively impact growth. The iron ore business remains a cash cow and will support investment in copper and lithium, among others.

AT&T (T)

AT&T (NYSE:T) stock is another name among undervalued blue-chip stocks to buy for high total returns. T stock trades at a forward price-earnings ratio of 5.8 and offers an attractive dividend yield of 7.93%.

AT&T has delivered muted revenue growth. However, the company believes that its free cash flow for the year would be $16 billion. Robust FCF will help the company to reduce its debt by approximately $4 billion by the end of this year. AT&T has further guided for net debt-to-adjusted EBITDA of 2.5x by 2025. With continued improvement in credit metrics, the stock is due for re-rating.

In the last three years, AT&T has invested $65 billion in capital investments. Additionally, $35 billion has been spent on spectrum. With 5G deployed to cover more than 300 million people, I expect steady growth in the coming years. As a matter of fact, the company’s post-paid phone and fiber subscribers have been in a steady uptrend.

Pfizer (PFE)

After a growth bump-up on the back of Covid-19 vaccine, Pfizer’s (NYSE:PFE) growth has moderated. This, coupled with drugs going off-patent, has translated into a correction in PFE stock. However, the stock looks attractively valued at a forward price-earnings ratio of 10.6.

I am bullish at current levels as Pfizer is betting on multiple new drugs being approved. The Food and Drug Administration has approved the company’s NGENLA drug. It is a weekly medication for kids above 3 years old who fail to secrete enough endogenous growth hormone. The drug will be available for sale in U.S. starting this month.

In addition, another drug LITULFO is also approved for the treatment of severe alopecia areata for adolescent patients. Moreover, FDA has accepted the application for the Fidanacogene Elaparvovec, which is to be used for the treatment of Hemophilia B.

Clearly, Pfizer has an attractive pipeline with multiple blockbuster drugs in the coming years that will support corporate growth. Further, a strong balance sheet has allowed Pfizer to pursue acquisitions for creating a diversified portfolio.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.