What Are Blue Chip Companies

What Are Blue Chip Companies

The term appears in the media time and again, both in terms of media coverage and in terms of the public’s perception of blue chip companies. Sources: 4

The definition of a blue chip stock varies, but it is generally considered a large, stable and safe company, whose shares act as a signal to the market. These companies have been around for decades or even longer and are considered blue chip stocks. Blue-chip stocks tend to represent companies that dominate their respective industries. Although there are many different definitions of what constitutes a blue chip stock, they generally tend to be a well-known, high-quality company that leads the industry. They are well-known companies that are leaders in their industry, such as pharmaceuticals, medical devices, technology, energy, telecommunications, etc. Sources: 0, 5, 8, 12

There are always individual exceptions to one or more of these rules, but generally blue chip companies have enjoyed stable earnings power for several decades. Analysts use a market capitalization of $5 billion as an indicator of a blue-chip company, and while this is not an exact figure, it speaks to the fact that a blue-chip stock is by definition a company with a large and well-managed balance sheet. This is what blue chip stocks are made of: These are large, stable companies and there will always be an individual exception to this or any other rule. Sources: 11, 17

The defining feature of a blue-chip stock is that the company that issues it is a massive, respectable pillar of the economy. Blue-chip companies have built reputable brands over the years and are known to weather downturns and be profitable in the face of them, which has contributed to their long-term success. While there will always be volatility in markets and companies will occasionally experience downturns, blue-chip companies know the importance of making smart growth decisions and managing risk. The fact that they have survived several depressions in this economy has made them a stable company that you should have in your portfolio. Sources: 1, 9, 13

Blue-chip stocks tend to pay reliable dividends, which can be expected of companies that are captains of their respective divisions. While dividend payments are absolutely necessary to consider a blue chip, most blue chips have a history of stable, rising dividends. Blue chip stocks tend to be expensive, do not grow much, pay high dividends and are stable. They are generally stable in the long term in terms of earnings per share (EPS), but pay a high dividend. Sources: 1, 5, 7

Blue-chip companies pay dividends, as opposed to growth companies that are able to reinvest their revenues in their own companies. Although it is not mandatory for all blue chip companies to pay a dividend, most blue chip companies pay dividends that are paid out regularly to shareholders. If you are looking for consistent returns, buying blue chip stocks is the best investment form, as most of them pay dividends to their investors, so they can help you grow your wealth over the long term. Blue chip stocks offer you an opportunity to invest in companies with good performance, not only in the US but also worldwide. Sources: 6, 7, 10, 15

Because of the size of the companies, many blue chip stocks can offer investors different industries from one stock to another, as well as different types of investments. Sources: 17

If you are unable to decide which blue chip company to invest in, choose a stock market-traded fund (ETF), investment trust or other type of investment that focuses on blue chip shares. You will find a wide selection of blue chips listed on the New York Stock Exchange (NYSE) and other exchanges. Choose your preferred blue chip company, do not take out shares or stocks and buy them based on an index that includes all blue chip stocks, or choose yourself. Sources: 0, 2, 3, 8

Since blue-chip stocks represent some of the world’s most well-known companies, you are likely to come across blue-chip names along the way. Chances are you have already used a blue chip name for a product or service in any way. With most blue chip stocks, an example is a well-known brand or product you have probably bought in the past. If a good blue chip stock is so well known in the market today, you can also recognize the company, and you can even recognize that the company is your favorite company. Sources: 14, 15, 18

Now that you know what a blue chip stock is, we’re gearing up to identify blue chip companies. Blue chip stocks are large, stable, reliably profitable companies that are part of a larger group of companies, such as financial services companies. Most blue chips and blue chip stocks are ordinary shares. Sources: 6, 10, 16

Blue chip stocks are high quality companies that have remained high quality companies over a long period of time. Blue-chip stocks are a good example of a “high-quality organization” that has remained a higher-quality company for an extended period – and under another. Sources: 14

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