Blue chip stocks are those stocks held by well-respected, high-quality companies who are leaders in their industry. These companies have been around for a long time and are well-respected by shareholders as well as their customers.
Blue chip companies offer solid business models as well as impressive track records for returns to investors. Blue chip stocks are a popular choice for conservative investors due to their regular, growing dividend payouts. To diversify portfolios and to provide stability during volatile stock market conditions, investors who are more cautious should also consider blue chip stocks.
In short, what is a blue chip stock? A blue chip stock refers to a security representing an equity position in a company which possesses the majority of the following characteristics.
A trusted business model and industry leader.
Proven track record and solid reputation with shareholders and customers.
The long-term history of strong returns.
Dividends to shareholders, and increases its payouts frequently.
Even if you have never invested in the stock exchange, you will recognize the names and addresses of top blue chip stocks. These large-cap firms provide services and products that are part of everyday life for billions around the globe. Here are some of our top picks for blue chip companies:
1. Apple
Apple (NASDAQ :AAPL), is one the world’s largest companies. It has made significant technological advances throughout its history. Apple pioneered innovation with its Macintosh computers back in 1980s. In the early 2000s it made media portable using its iPods. Apple Watches and iPhones are still a common sight today. Apple’s products have a remarkable reputation for loyalty in an age where tech-savvy consumers are eager to purchase the latest gadgets.
Apple also generates recurring revenues through its services. This includes its iTunes, App Store, streaming television and streaming business. Apple’s market cap climbed to over $1 trillion in 2018, then to an unprecedented 2 trillion in 2020. Apple briefly surpassed the $3 trillion mark on January 3, 2022. But its market cap fell along with many other NASDAQ businesses in early 2022. Apple is still the largest public company, and the business continues to grow.
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 holds a wide range of businesses including Dairy Queen, the railroad giant BNSF and its Berkshire Hathaway Energy utility. Because the company owns so many businesses, it has a reputation of safety and security as well as consistently high performance.
Berkshire Hathaway is not the only blue chip stock that does not pay a dividend. Warren Buffett is a market-beating leader with one of the greatest track records. He prefers to use the company’s cash instead of paying dividends. So far, shareholders have been very happy with this strategy.
3. Coca-Cola
Coca-Cola is a global leader in the beverage market for more than 100 years. The company’s soft drink has grown to be a worldwide phenomenon. Coca-Cola is adapting with the times. They now offer a wider variety of products, including juices and sports drinks.
Coca-Cola stands out in increasing its dividend. Coca-Cola’s history of paying consecutive dividend increases has been going back to the 1960s. This record puts it among the 10 best dividend stocks.
4. Johnson & Johnson
Johnson & Johnson is well-known because of its popular consumer products like baby shampoo, Band-Aids or Tylenol painkiller. J&J, a true healthcare company, makes a vast array of medical devices that doctors and other medical professionals can use to save their lives. Johnson & Johnson also owns a large pharmaceutical business, producing drugs like Remicade for arthritis, Zytiga for prostate Cancer, and Stelara to treat psoriasis.
J&J plans to split into two companies in November 2023. It is something worth paying attention to. The one company will concentrate on consumer health products. This is the weaker part of J&J’s business. The pharmaceuticals and medical equipment segment of J&J will be found in the other company.
5. American Express
Blue chip giant American Express is another one to look at. It serves as both a payment network and a credit-card company. Its major revenue streams are transaction processing fees, credit card fees, and credit card fees. The company has the potential to grow both its revenue streams from new users and transaction volume. It is over 170 years old but still has relevance. More than half the new cards opened in 2021 were created by Gen Z and millennial consumers. This is a good sign.
American Express’s management is confident that it will grow its profits at a double digit rate over the next few years. They also plan to distribute roughly 25% of their profits to shareholders as dividends. It has already increased its dividend 20% by 2022 (as per June 2022). Expect future earnings growth to lead to further increases.
Blue chips on a larger scale
Blue chip stocks offer investors a wide range of options. Here are 20 other top blue chips stocks:
AbbVie(NYSE:ABBV).
Nike
Lockheed Martin
Honeywell International
Procter & Gamble NYSE
Mastercard(NYSE:MA).
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)
Intel
Goldman Sachs (NYSE:GS)
Invest in blue-chip businesses
Blue chip stocks can be a smart investment choice for all investors. Many blue-chip companies’ products and services are familiar to novice investors. Being familiar with a company can make stock buying easier. Additionally, it’s fun to become part-owner of a business you already know. Blue chip stocks will continue to rise in the long-term, outlasting rivals and finding new ways to grow and remain relevant, even as their industries change. Long-time investors will be familiar with these blue chips.
Investors with all levels of experience can appreciate the reliability and stability that blue-chip businesses provide to their shareholders. These blue-chip companies have a history of paying large dividends and exhibiting high payout growth, earning them a place in the distinguished ranks of the Dividend Aristocrats as well as the Dividend Kings.
Blue-chip funds and hands-off investing
Mutual funds and exchange traded funds (ETFs), may also be of interest to investors. These blue chip funds combine several blue chip stocks into one security. It allows you to diversify across many high quality stocks. These investment vehicles tend to be less volatile that individual stocks which is a plus for those who are retiring or close to retirement. Blue chip funds may also suit younger investors who want to take advantage of the diversification benefits or don’t have time to properly research individual stocks.
Blue chips in a balanced portfolio
If you want maximum growth in your stock portfolio, you should look beyond blue chip stocks to consider small-cap stocks from young innovative companies looking to disrupt large-cap rivals. These high-growth startups aim to be tomorrow’s blue chip stocks.
An investment in blue-chip stocks can be a good idea for almost all investors. There is no set amount; investors may have different opinions about how much risk to take. As you strive to achieve your goals and attain your long-term financial goals, the more you want the stock market to be safe and secure your investments will be more attractive to blue chip stocks.
