Blue chip stocks represent stocks of well-known and high-quality companies, which are leaders in their fields. These companies have stood the test and are highly respected by shareholders and customers.
Blue chip companies have strong business models and impressive track record of returns for investors. These returns often include growing dividend payments that make blue chip stocks a favorite among conservative investors. Blue chip stocks are also a good option for risk-tolerant investors looking to diversify and provide stability in volatile stock markets.
Let’s take a look at blue chip stocks. A bluechip stock is an equity share in a company that has the most of the following characteristics.
A reliable business model makes you a leader in your industry.
An excellent track record with strong reputation with shareholders as well as consumers.
Strong returns over the long-term
Dividends to shareholders. Regularly increases payouts.
Even if the stock market is new to you, it’s easy to identify the names of some top blue-chip stocks. These large-cap corporations provide products and services that are a part of every day life for billions across the globe. Here are some top blue-chip businesses on the market.
1. Apple
Apple, NASDAQ:AAPL, is one of world’s most successful companies. The company has been a leader in technology innovation throughout its history. Apple invented the Macintosh computer in the 1980s. The company made media portable in the early 2000s with the iPods. Apple Watches, iPhones and iPads are now ubiquitous. Apple products are well-respected in a world where customers flock to latest tech fads.
Apple also receives recurring revenue via its services. These include iTunes and App Store as well as streaming TV businesses. Apple’s 2018 market capitalization reached $1 trillion, and in 2020 it reached an unprecedented $2 Trillion. Apple’s market capitalization briefly climbed to $3 trillion on January 3, 2022. It declined, however, just like many other NASDAQ companies, in the first 2022. Apple remains today the largest public company and the business is 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 owns a number of businesses, such as Dairy Queen restaurant, railroad giant BNSF, or its Berkshire Hathaway Energy utility. This broad portfolio of businesses has earned the company a reputation for safety-and-security, and consistent performance.
Berkshire Hathaway (blue chip) is the only stock that doesn’t pay dividends. Warren Buffett, the CEO, has one the best market-beating track records in history. Buffett prefers to hold the company’s money rather than paying dividends. It has proven to be a winning strategy for shareholders.
3. Coca-Cola
Coca-Cola, NYSE:KO, has been a leader of the beverage industry for more then a century. After its soft drink was named, it spawned a global empire. Coca-Cola’s products have evolved over time and now include juices, sports drinks, bottled water, and other beverages that can be used to support a healthier lifestyle.
Coca-Cola has a reputation for increasing its dividend. Since the early 1960s, Coca-Cola has had a streak of consecutive annual dividend payments increases. This is a record that places it amongst the top 10 dividend stocks.
4. Johnson & Johnson
Johnson & Johnson, NYSE:JNJ, is well-known as a manufacturer of popular consumer products, such as baby shampoo and Tylenol painkiller. J&J also makes medical devices for doctors and other medical professionals that save lives. Johnson & Johnson also runs a huge pharmaceutical business. They produce drugs such as Remicade, Zytiga for prostate and Stelara, which are used to treat psoriasis.
J&J is dividing into two companies, which will take place in November 2023. The first company will focus on consumer products, the weaker section of J&J’s business. The other will include its highly regarded medical devices and pharmaceuticals segment.
5. American Express
Another blue-chip stalwart is the financial giant American Express. (NYSE:AXP). It is both a card company and a network of payments. It’s principal revenue generators are credit card processing fees and transaction fees. The company plans to increase its revenue streams by attracting new customers and increasing transaction volume. It’s over 170 years-old, but it seems to still be relevant. In 2021 more than half of new cards were issued to Gen Z and millennial cardholders — encouraging news.
American Express management believes it can grow profits at a double-digit speed in years to follow. In addition, it plans to pay approximately a quarter of its profits out to shareholders in dividends. It already increased its dividend by 20% in 2022 (as at June 2022). Additional increases should be possible in the future due to continued earnings growth.
Blue chips: A bigger selection
Investors have many options when it comes to blue chip stocks. Here’s a list with 20 other blue-chip stocks that are highly regarded:
ABBV
Nike
Lockheed Martin
Honeywell International
Procter & Gamble – NYSE:
Mastercard
JPMorgan Chase (NYSE:JPM)
Walmart (NYSE:WMT)
Microsoft
Caterpillar (NYSE:CAT)
UnitedHealth Group(NYSE:UNH).
Starbucks
Oracle
Northrop Grumman(NYSE:NOC
McDonald’s (NYSE:MCD)
Home Depot [NYSE:HD]
Kroger (NYSE.KR)
Merck (NYSE:MRK)
Intl (NASDAQ :INTC).
Goldman Sachs (NYSE:GS)
Investing with blue-chip companies
Blue chip stocks make good investments for investors of any age. An investor who is just starting out will likely be familiar with the products, services and operations of blue-chip companies. Knowing a company’s products and services makes stock investing more easy. It can also be exciting to own a small part of a company you know. Long-term investors will see blue chip stocks rise to top over time, outlasting their weaker counterparts, and finding ways that they can stay relevant and continue growing despite changing industries.
Investors of all levels will appreciate the stability, reliability, and security that blue-chip companies offer to shareholders. Many of these companies pay significant dividends and have great payout growth streaks which have earned them a place amongst the elite Dividend Aristocrats.
Blue-chip funds, hands-off investment
You might also consider mutual funds or exchange traded funds. Blue-chip funds bundle several blue-chip stocks in one security. This makes it easy to diversify across a variety of high-quality stocks. These investment vehicles can also be more volatile than individual stocks. This is especially appealing to those who are nearing retirement or retired. Blue chip funds can be a good choice for younger investors who seek diversification and don’t have sufficient time to fully research individual stocks.
Blue chips in a well-balanced portfolio
If you are looking to maximize your stock investment growth, you will want to look beyond blue chips to see small-cap stocks owned by young, innovative companies that aim to disrupt the larger market. These high-growth start-ups are the blue chips stocks of the future.
A portion of your portfolio can be invested in blue chips stocks. However, this is something that almost every investor can do. It doesn’t necessarily have to be a fixed percentage. Investors will have different perspectives on how much risk they wish to accept. The more you want your money to stay safe and sound, the more blue-chip stocks will appeal to you as you work to reach your financial goals.
