Blue chip stocks get their name from the blue poker chip, which holds the highest value.
While there’s no strict definition of what makes a company a blue chip stock, they are generally large, well-known, high-quality industry leaders with reliable financial performance and growth.
When people discuss “blue chip stocks,” they’re usually referring to household brand names with a long history of steady performance and a dominant market share in their industry.
Blue Chip Stocks with High Dividends
Blue chip stocks often have stable revenue and earnings growth driven by a proven line of mature products. For example, Apple (AAPL) sells iPhones, iPads, Macs, Apple Watches, Apple TVs, accessories, and digital content which all have fairly predictable and reliable sales.
In general, blue chips are considered a “safer” investment with less volatility and less vulnerability during a market downturn (their steady dividends help with this).
However, the flip side is that their growth is often much slower than up-and-coming small cap stocks or mid cap stocks. In fact, sometimes their growth is actually in decline. For example, IBM (IBM), Coca-Cola (KO), and McDonald’s (MCD) – classic blue chip stocks – have all seen years of declining sales.
To make up for slower growth, blue chip stocks often pay steady dividends. Since they’re already large cap companies that have a range of mature products, they decide to return a sizeable portion of their earnings back to shareholders by paying dividends.
If you want to buy blue chips for your portfolio, start by looking at the Dow Jones Industrial Average (DJIA) which holds 30 blue chip companies like Apple (AAPL), Caterpillar (CAT), Disney (DIS), and Walmart (WMT).
Note that all 30 blue chip stocks on the Dow Jones Industrial Average (DJIA) pay some kind of dividend:
Blue Chip Stocks of the Dow Jones Industrial Average (DJIA)
|Blue Chip Stock||Company Name||Market Cap ($M)||Dividend Yield|
|JNJ||Johnson & Johnson||$373,886||2.58%|
|PG||Procter & Gamble||$205,843||3.48%|
When it comes to blue chip stocks, the Dow Jones Industrial Average (DJIA) is a great place to start, but there are only 30 stocks on the list. For more blue chip stock names, we recommend checking out the S&P 500 which contains 500 of the largest companies trading in the U.S.
Data as of 10/8/18