What are Blue Chip Stocks?

But diversification also means broadening your sector exposure. One way to do this is to find mutual funds and exchange traded funds that specialize in blue chip stocks. However, the “price” that investors pay for that stability is muted (but not non-existent) organic growth. With that said, blue chip stocks deserve a place in every portfolio. And in this article we’ll explain why there’s never a bad time for investors to buy the blue chips. Mutual funds and exchange-traded funds , which are baskets containing many securities like stocks, can include blue chips.

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• The term “blue-chip” to describe a company as valuable and prestigious comes from a poker game.
• A distinguished list is the Dow Jones Industrial Average index, or Dow Jones 30, which highlights the 30 best blue-chip stocks in the US on an updated basis.
• Plenty of the most accomplished stars in professional sports appeared on “blue chip” lists before going pro, and they proved deserving of the title.

They are often household names known to the general public, rather than just investors or enthusiasts. Conversely, more conservative investors need not stick to fixed income, low growth assets. Buying blue chip stocks can offer the opportunity for capital gains that may, in many cases, outpace the rate of inflation which is a concern with fixed-income investments. And since many blue chip stocks pay dividends and rising dividends at that, investors have another avenue for collecting income from these high-quality stocks. Another characteristic blue chip stocks typically share is that they post steady earnings, and therefore often pay dividends.

What Blue Chip Means

This indicates that even the best stocks struggle in extreme economic downturns. Among blue chip institutions, JP Morgan Chase managed to survive the 2008 crisis. Blue chip companies are very large, well-established companies that usually have a market capitalization in the billions.

Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Wherever you are in your investment journey, blue-chip stocks could be an excellent fit for your portfolio. As long as you know the risks and what you are buying, what is a transaction broker they may even make a great addition during a market downturn. In the long run, most blue-chip stocks will bounce back stronger than ever. Blue-chip stocks make up the bulk of many portfolios, but they are not the only place most investors should focus their funds.

Blue Chip Dividend Stocks – Investment Checklist

Over the long term, reinvested dividends account for some 80% of total stock market returns. It happens to be that many of the blue-chip companies on major exchange lists originated from small shares of public companies, referred to as “penny stocks”. These instruments are also available to trade on our Next Generation platform.

• They allow traders to leverage by trading on the margin and trade both long and short positions.
• Blue-chip stocks may decline in value or remain flat during a period when small-cap stocks, stocks of foreign companies, or bonds are rising.
• Dividends also suggest a company is profitable, stable, and confident in its long-term outlook.
• While this is by no means an exhaustive list of all the stocks that can be classified as blue chip, this sampling helps show that blue chip stocks come from all industries.
• A blue chip stock is a company that typically has a large market cap, a sterling reputation and many years of success in the business world.
• Diversification and asset allocation do not guarantee a profit, nor do they eliminate the risk of loss of principal.

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Guide to Investing in REITs for Income

So a comparatively slower but reasonable future growth is something which they can deliver. These stocks are found on top stock market indices—S&P 500, Dow Jones Industrial Average , NASDAQ, and National Stock Exchange summary and critique of the black swan . © 2022 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed.

• As these companies are well established and mature, their size is large.
• Below you can find examples of well-known blue-chip stocks.
• Yes, blue chip stocks can also go down in a market downturn, but they are less likely to fall as far or as fast since the companies are big enough to withstand most adverse economic situations.
• We prefer to see dividend growth in excess of the rate of inflation (3%+ per year) and stable payout ratios, meaning the dividend is growing in line with cash flow growth.

You’ll probably know most, if not all, of these companies. You might also notice that they are leaders in their respective industries, and have been on the market for 40 years or even longer. Research & market reviews new Get trading insights from our analytical reports and premium market reviews. At NextAdvisor we’re firm believers in transparency and editorial independence.

Blue-Chip Stock #5: Verizon Communications (VZ)

Each week, you’ll get a crash course on the biggest issues to make your next financial decision the right one. Some companies found themselves in the right place at the right time. Think about the housing market boom or the commodities market fueled by China’s debt-fueled infrastructure binge. By using this site, you are agreeing to security monitoring and auditing. For best practices on efficiently downloading information from SEC.gov, including the latest EDGAR filings, visit sec.gov/developer. Get tight spreads, no hidden fees, access to 12,000 instruments and more.

He has in-depth experience writing about banking, credit cards, investing and other financial topics and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers and spending time with his wife and little girls. CompanyYear FoundedDuPont1802JPMorgan Chase1799Cigna1792McKesson1833Pfizer1849That doesn’t mean they may not experience short-term volatility or declines in value. But in the long run, they are likely to experience a full recovery and provide long-term investors with positive returns. Acorns Checking Real-Time Round-Ups® invests small amounts of money from purchases made using an Acorns Checking account into the client’s Acorns Investment account.

What Is a Blue Chip?

Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning.

First, it must be large enough to make it through a downturn, as noted earlier. The market capitalization of a blue chip company is usually in the billions of dollars. Secondly, a company must have a sufficiently high credit rating to qualify as a blue chip. In particular, the downgrading of a company’s debt to junk bond status is sufficient to disqualify it from being a blue chip. What do IBM, Walmart, JPMorgan Chase, and DuPont have in common? Although they are in different sectors, they are all known as blue chip companies.

Qualcomm Technology Licensing, or QTL, improved by 2% to $1.5 billion. Qualcomm repurchased four million shares at an average price of $125 during the quarter. Leadership forecasts adjusted earnings-per-share of $3.00 to $3.30 for the fourth quarter, compared to consensus of $3.25. You can find blue-chip dividend stocks using the lists and spreadsheet below. NerdWallet strives to keep its information accurate and up to date.

Sonoco was founded in Hartsville, South Carolina in 1899 and introduced the first paper textile cone. The company generates about $7.2 billion in annual sales. Sonoco Products is now profiting in bear and bull markets composed of 2 segments, Consumer Packaging and Industrial Packaging, with all other businesses listed as “all other”. We don’t like the idea of using poker analogies for investing.

And Fidelity supports fractional shares and charges no commissions. In fact, most blue-chip companies have survived many market downturns. Blue-chip company leaders know how to manage even the most challenging circumstances. A properly suggested portfolio recommendation is dependent upon current and accurate financial and risk profiles. Cathie Ericson is a freelance writer who covers personal finance, real estate and small business, among other topics. The key for any investor is to have the blend of investments that is right for you and your individual goals.

A company can grow its dividend using different means – free cash flow growth, raising debt, or issuing shares of stock. The only sustainable form of dividend growth is free cash flow growth. Without free cash flow, companies have fewer resources at their disposable to continuously reinvent themselves and can also be more dependent on access to credit markets. Both of these factors can significantly shorten a company’s lifespan.