Blue Chip Stocks (2022)

Best Blue Chip Stocks In 2021 | Investing in Blue Chip Stocks

Blue-chip equities are recognized for their high quality and consistency. Although there is no precise definition, investors generally accept that a blue-chip stock has a market value of at least $5 billion and belongs to the category of large-cap stocks.

Blue Chip Stocks are dividend aristocrats

Blue chip stocks that meet analysts’ expectations for earnings growth, as well as having rock-solid balance sheets and delivering quarterly earnings increases that frequently exceed forecasts, are dividend aristocrats. They have a track record of paying a high dividend and placing total shareholder returns ahead of rising dividends.

• However, this stability comes at a cost: growth. While these properties may appeal to value investors, they are not regarded as growth stocks by investors searching for such things.
• Stocks in this category are often referred to as “beta-beats,” since their beta (correlation) is usually around 1. While these stocks have a strong correlation with the stock market as a whole, many younger investors may profit more from mid-sized or small-cap firms that can provide bigger growth potential.

Different ways to buy blue chip stocks

Individual equities or the benefits of blue-chip stocks as part of mutual funds or exchange-traded funds (ETF) that specialize in may be used to invest in blue-chip companies. This is a fantastic approach for investors to profit from rising dividends without having to pick and choose individual stocks.

Introduction in blue chip stocks

When we hear the words “blue chip” we may think of something of the highest quality and value. In the game of poker, the blue chips always represent the highest dollar value.

A blue-chip panel of experts is considered to consist of individuals of the highest knowledge and character to bring to a subject.

Benefits of investing in blue chip stock

There are several benefits of investing in blue-chip stocks.

1. Blue chip stocks have been known to rise during the worst market declines, meaning they are a more stable route for your money. They also represent companies with a high amount of longevity and strong brands who have proven themselves to be profitable and valuable players on their respective industries.
2. Blue chip stocks offer greater liquidity than most other equity options. They also provide great stability for dividend payments, with many blue-chip stocks having a history of raising their dividends year after year.
3. Blue chip stocks are large companies that have sound financials and strong track records of profitability over long periods of time. This means they are likely to be more stable than smaller firms who may see more volatility.

In this article, we’ll take a closer look at blue-chip stocks. In the process of doing so, we’ll define the reasons why investors seek them out including the reason blue chip stocks are known as great dividend-paying stocks which can greatly increase an investor’s total return.

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What is a blue chip stock?

Fundamental and technical analysts alike agree that there is no statistical definition for a blue-chip stock. There are no straightforward financial measures that instantly qualify a stock as a blue-chip, nor does the stock’s intrinsic value suggest it belongs in the category.

However, there are some broad rules that appear to influence the inclusion of a blue-chip stock on one of the major stock exchanges.

1. Large, and stable companies

A $5 billion market capitalization is viewed by some investors as a sign of a blue-chip corporation. While that isn’t an exact figure, it implies that a blue-chip stock is, by definition, one with a solid, well-managed financial position. A blue-chip company typically has inexpensive borrowing options.

2. Leading in their respective industry

Blue-chip stocks are leaders in their respective industries, and one trait they share is leadership. They have a significant market share and are usually among the top three in terms of market share in a sector. Blue-chip stocks frequently, but not always, provide goods that give you an unfair advantage.

3. Long track record of dependable earnings

Blue-chip stocks differ from other equities in another respect: they consistently deliver good results. These companies are not “flashes in the pan,” but rather firms that have shown their capacity to succeed during prosperous economic periods and withstand difficult times while continuing to develop.

Blue-chip stocks have profit margins that are typically greater than those of their competition. This is due to inherent characteristics such as the strength of their brand and fundamental factors like pricing power and scale.

What is an example of a blue-chip stock?

A blue-chip stock is a huge company with an excellent reputation. These are typically large, well-established and financially sound companies that have operated for many years and that have dependable earnings, often paying dividends to investors. Some examples of blue-chip stocks are IBM Corp., Coca-Cola Co.

Is Apple a blue-chip stock?

Blue-chip companies usually have big market caps, strong balance sheets, and solid history. Some examples of the blue-chip stocks are Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN) and The Walt Disney Company (NYSE: DIS).

Blue-chip stocks are about value first

The term “blue-chip” does not imply that blue-chip stocks are non-aggressive growth investments. That does not, however, negate the fact that they are growth stocks. Their value is derived from their dependability and high volume.

1. Many of these companies have solid business foundations and a large inherent value. Many of these stocks have well-known, iconic brand names attached to them.
2. Although this does not assure future success (we can all think of companies and sectors that no longer exist), it does tend to suggest that these firms are durable even in good and bad economic times.

Is bluechip a good investment?

Blue-chip stocks are considered safe investment options as they can endure economic downturns and are not highly volatile. They also present a slow but moderate growth potential. These are typically dividend-paying stocks where the payment is made quarterly.

Top 5 best blue chip companies

The best blue chip companies are those with a long history of success, a commitment to innovation, and a dedication to their shareholders. They typically have a large market cap, strong financials, and a dominant market position in their industry.

1. Apple Inc
2. Microsoft Corporation
3. Amazon.com
4. Johnson & Johnson
5. Exxon Mobil Corporation

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Blue chip stocks do not move much in price

Blue-chip companies are recognized for their consistency. This does not imply that blue-chip stocks don’t increase. It simply implies that blue chips exhibit less volatility than the overall market.

• Yahoo Finance provides good financial information and tools. You may check current stock prices along with company fundamentals, trend data, fundamental analysis and more; it’s a great place to start looking for stocks to buy.
• While these stocks may not show the aggressive growth of small-cap or mid-cap stocks, they offer a higher degree of certainty for investors who can count on these stocks to rise during good times, but perhaps not fall as dramatically when the stock market is down.

Are blue chip stocks low risk?

Blue-chip stocks are not high risk, so they’re popular among investors with lower risk tolerance. While blue-chip stocks aren’t bulletproof, their history of resisting market downturns makes them an appealing choice for many investors looking for the best stock.

Can you make money with blue chip stocks?

Blue chip firms frequently make regular and increasing dividend payments. Blue chip stocks have delivered attractive returns for long periods of time due to their strong business models, making them one of the most popular individual equities among conservative investors seeking for places to put their money to work.

Do blue chip stocks pay dividends?

However, not every blue-chip stock pays a dividend. Not all of the greatest blue-chip businesses pay dividends, although many of them do. Some are Dividend Aristocrats, which means they have raised their dividends continuously for at least 25 years in a row.

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Blue chips have a strong dividend history

Blue-chip stocks are those whose earnings are designated by the Securities and Exchange Commission (SEC) to be eligible for a dividend. Most, but not all, blue-chip companies have paid dividends in the past.

• Many corporations make dividend growth as an incentive for their investors a top priority. Blue-chip firms generally have strong financials, which is a big reason why they can afford to pay a dividend.
• While it doesn’t mean these stocks will never decline in value it does mean that they have a proven track record of making shareholder equity a priority.
• By definition, dividend aristocrats are required to fulfill specific market capitalization and liquidity criteria. This implies that while not all blue-chip stocks qualify as dividend aristocrats. Blue-chip equities is the category in which all dividend aristocrats belong.
• Dividends are typically reinvested by investors, which has resulted in higher overall returns. When the stocks’ total return is compared without dividends reinvested, it does not always outperform the market.

Disadvantages to blue-chip stocks

Blue-chip stocks are popular investments for most investors. These stocks, on the other hand, have a somewhat limited profit margin for younger investors due to several factors such as:

1. Blue chip stocks do not beat the stock market

Stocks with a beta of 1 are usually blue-chips, which help to push market averages. Many of these firms will have a beta close to 1, implying that their performance will track closely to the S&P 500 Index.

• When the index rises, these firms will follow closely. When the stock market falls, however, this is also true.
• Young investors with a long investment time horizon can generally survive the ups and downs of small-cap and mid-cap equities that have more volatility.

2. Focus on rewarding shareholders more than investing in the business

Smaller firms, on the other hand, tend to reinvest their earnings back into their business by repurchasing shares or taking on debt to grow their operations, allowing them to increase share value.

Blue chips, on the other hand, place their earnings back into dividends to thank investors. Investors who are not in need of this residual income may be better served by more aggressive stocks in an effort to accumulate wealth.

3. Blue chip equities are made up of older, more well-established businesses

One of the qualities of blue-chip stocks is their intrinsic value. Investors of all ages recognize many of these names.

• However, younger investors are becoming early adopters and are in tune with the technological advancements that are creating many of the products that are changing our lives.
• These products are being developed by younger companies who may present more enticing growth opportunities.

4. Good news is priced into blue-chip stocks

While blue-chip stocks are known for their stability, they are not without risk. This is because of the halo effect these stocks receive. Their stability creates a “benefit of the doubt” that is typically baked into the stock’s price.

• When these stocks are the focus of bad news (e.g. a product recall, a poor earnings report, an executive scandal), the stock can be punished.
• And while younger investors, in general, have a higher risk tolerance than investors who are at or nearing retirement age, they may be better served to invest in stocks that have the ability to rebound from losses faster.

How to invest in blue chip stocks?

On the various stock exchanges across the United States, investors might find blue-chip stocks to buy, including the Dow Jones Industrial Average, Standard & Poor’s (S&P) 500, and NASDAQ. The FANG stocks (Facebook, Amazon, Netflix, and Google/Alphabet) are drawing a lot of attention due to their performance on the market

Investors can find international blue-chip stocks on foreign indexes such as the NASDAQ, NYSE, AMEX, EPA, TSX-60 index (Canada) and the LON index in the United Kingdom. Investors should perform the same due diligence with blue-chip stocks as they would with any investment.

Although investing is never without risk, blue-chip stocks tend to be less volatile than other equities, making them more appealing to investors with lower risk tolerance.

Investing in blue-chip stocks offer several important benefits:

1. Well-known brands. Legendary investor Warren Buffett has always advised investors to invest in companies who have businesses they understand. Investors who like Coca-Cola or are diehard Microsoft users may find there is security in investing in companies that they can “follow” without diving into balance sheets or other technical metrics.
2. Ease of access. Because of their popularity, blue-chip stocks can be easy to buy and sell. This helps ensure that investors will be able to buy or sell a stock when they desire.
3. Tax-free benefits. A blue-chip stock can be included in a stocks and shares ISA, which can protect gains from taxation.
4. Many blue-chip companies offer diversification. Because of the size of these companies, many blue-chip stocks can offer investors exposure to different sectors in one stock. For example, an investment in a company like British Petroleum can give investors exposure to not only the oil and gas sector but also the commodities market because of some of its other business units.
5. Investors have a variety of investment options. Blue-chip stocks can be invested in as part of an index fund or an exchange-traded fund (ETF). These funds can allow investors to invest in particular sectors (e.g. financial, technology).

Conclusion blue chip stocks

A blue-chip stock has no single definition, although it does have certain characteristics in common, including a solid balance sheet with large and consistent cash flows, as well as an enduring business model that generates fundamental and inherent value, which helps to drive strong growth.

These are only a few of the reasons that these stocks are considered safe investments. Blue-chip equities are valued on their ability to generate regular dividend payments, as well as for their consistent growth.

• Some of the characteristics that distinguish blue-chip stocks might scare novice investors who have a greater risk tolerance and a longer time horizon away from these investments, making smaller stocks in cutting-edge firms more appealing.
• Blue-chip stocks should be included in every investor’s portfolio. They, like all investments, should not be the only assets for younger investors with a higher tolerance for risk.
• For these traders, a method to riches might include small- and mid-cap stocks. A well-balanced portfolio should also include assets like as bonds and cash. Of course, the proportion of a portfolio that should be allocated to equities, bonds, or cash will vary from person to person.