Blue-chip stocks are shares of high-quality, well-respected companies that are leaders and innovators in their industries. These companies have stood up to the test of times and are respected by both their shareholders and their customers.
Blue chip businesses have solid business models, and have impressive track records of returning investors. These returns often include steady and growing dividends, making blue chips stocks one of the most sought-after investments for conservative investors. Investors who are less risk-averse should still consider blue chip stock purchases to increase their portfolio diversification and stability during volatile stock markets.
So what, in short, are blue chips stocks? A blue-chip security is an equity stock that represents a majority of the following characteristics.
Industry leader with a solid business model.
A strong reputation and track record of success with shareholders and consumers.
Long-term track record of producing strong returns
Dividends to shareholders. Increases its payouts often.
Even if investing in stocks is not something you’ve done before, you’ll be familiar with the names many blue-chip companies. These large-cap businesses provide products, services and infrastructure that is part of daily life for billions all over the globe. Here’s a list of some of the most reputable blue-chip companies on the marketplace:
1. Apple
Apple NASDAQ:AAPL is one among the largest companies worldwide and has led technological advancements throughout its long history. Apple innovated with its Macintosh computers during the 1980s. Apple made media portable with its iPods early in 2000. Apple Watches as well as its iPhones, iPads and iPads remain ubiquitous today. Apple’s products inspire loyalty from customers in a world of tech fads.
Apple also earns recurring income through its services. Apple’s total market capitalization has risen to more than $1 trillion in 2018, rising to an unprecedented $2 billion in 2020. Apple reached the $3 trillion mark briefly on January 3, 2022. However its market cap dropped along with many other NASDAQ stocks in early 2022. Apple remains the largest company in the public sector today — and the business keeps growing.
2. Berkshire Hathaway
Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is a major player in the insurance industry, offering various lines of commercial and personal insurance through subsidiaries GEICO and Gen Re. Berkshire also has a range of businesses like Dairy Queen, BNSF’s railroad giant, and its Berkshire Hathaway Energy utility firm. With such a wide range of businesses, Berkshire has a reputation both for safety and security and consistent performance.
Berkshire Hathaway has the only blue-chip stock that does NOT pay a dividend. Warren Buffett, the CEO of Berkshire Hathaway, has one-of-the most impressive track records for market-beating returns. Buffett prefers investing the company’s cash to pay dividends. This strategy has paid dividends well so far.
3. Coca-Cola
Coca-Cola (NYSE.KO) has been a leading beverage company for more than 100 year. Their soft drink, Coca-Cola spawned an empire across the globe. Coca-Cola has changed over the years and offers a wider selection of products. These include juices, sports beverages, and bottled waters that are better for health-conscious customers.
Coca-Cola is a leader in increasing its dividend. Coca-Cola is one of the most popular dividend stocks, having been increasing its dividend every year since the 1960s.
4. Johnson & Johnson
Johnson & Johnson NYSE:JNJ is known for its many consumer products including Tylenol painkiller, Band-Aids, baby shampoo. J&J is a true health care giant. They make a wide range of medical devices to aid doctors and other medical professionals in life-saving procedures. Johnson & Johnson also operates a large pharmaceutical company, making drugs such the Remicade treatment for arthritis and Zytiga (prostate cancer drug Zytiga) and Stelara (psoriasis medication).
J&J intends to break up into two separate companies by November 2023. The company that will focus on consumer healthcare products, the weakest segment of J&J’s businesses, will be the other. The second will house its highly-respected medical devices and pharmaceuticals segments.
5. American Express
Another blue chip company to keep an eye on is American Express , a financial giant (NYSE:AXP). It’s both an online credit card company, and a payments network. Its main revenue sources include transaction processing fees as well as credit card fees. The company has plans to increase both the revenue streams through new users and increased transaction volume. Although the company is older than 170, it appears to be still relevant. Nearly half of all new cards issued in 2021 came from millennial or Gen Z cardholders. This is encouraging.
American Express’ management believes it has the potential to grow its profits at double-digit rates in the coming years. Additionally, it plans on paying out approximately 25% of its profits as shareholder dividends. It raised its dividend by 20% as of June 2002. It expects to continue growing its earnings in the future.
Blue chips are more plentiful
Investors have a large selection of blue-chip stocks to choose. Here are 20 additional top blue chip stocks.
- Abbv
- Nike
- Lockheed Martin
- Honeywell International
- Procter & Gamble NYSE
- Mastercard
- JPMorgan Chase (NYSE:JPM)
- Walmart (NYSE:WMT)
- Microsoft
- Caterpillar (NYSE:CAT)
- UnitedHealth Group
- Starbucks
- Oracle
- Northrop Grumman
- McDonald’s (NYSE:MCD)
- Home Depot
- Kroger
- Merck (NYSE:MRK)
- Intel
- Goldman Sachs (NYSE:GS)
Investing In Blue Chip Companies
Blue chip stocks are smart investments for all types of investors. Most blue chip companies offer products and services that are familiar to beginners. A familiarity with a company makes stock trading easier. It is also more fun to become a part-owner in a business you know. Long-time investors have seen blue chip stocks rise over the long run, outlasting weaker competition and finding ways of staying relevant and growing even in changing industries.
Blue-chip businesses are a reliable and stable investment option for investors of all experience levels. Many of these companies offer substantial dividends with a steady growth rate that has earned them a place in the elite group of Dividend Aristocrats.
Blue chip funds offer hands-off investments
An alternative option for investors is to look at mutual funds and exchange traded fund (ETFs). These blue-chip funds combine multiple blue chips stocks into one security. They offer a simple way for investors to diversify across multiple high-quality stock. These investment vehicles are less volatile than individual stock options, which can be appealing to retirees and those in the midst of retirement. For younger investors, who may be looking for diversification or are unable to devote the necessary time to researching individual stocks, blue chip funds could be a good option.
Blue chips in well-balanced portfolio
If you’re looking to grow your stock portfolio to its maximum potential, look beyond bluechip stocks to explore small-cap stocks. These stocks are often owned by innovative young companies who want to disrupt larger firms. These high-growth entrepreneurs aim to be the bluechip stocks of tomorrow. A blue chip stock portfolio is a great investment option for nearly all investors. It doesn’t need be a certain percentage. Investors have different perspectives about how much risk they are willing and able to take. However, blue-chip stocks are more attractive if you’re trying to achieve your long-term goals and preserve your investment in the stock exchange.
