What Are Blue Chip Stocks?
While there is no precise definition of what makes a blue chip stock, a blue chip stock tends to be stocks of well-known, high-quality companies that are leaders in their industries. Most of these companies have paid and increased their dividends for many years as well, a signal of financial strength and stability.
Many blue chip stocks have produced long records of attractive returns based on solid business models, and made them a popular group of stocks for conservative investors to look at.
Finding Blue Chip Dividend Stocks
Blue chip dividend stocks have generally proven to be some of the most durable companies around and interesting to conservative investors with a buy-and-hold strategy. While blue chip stocks are not always a great investment, they are a good starting place to look for high-quality stocks.
The term “blue chip stocks” comes from poker and is probably first used in the 1920s by Oliver Gingold, a Dow Jones reporter. In poker, the chip with the highest value is a blue chip. While there is no precise definition of what makes a blue chip stock, they are typically large in size (e.g. market caps exceeding $50 billion) and have a leading role in the economy with stable earnings even during recessions.
We define Blue Chip stocks as companies that are members of 1 or more of the following 3 lists and pay a dividend:
- Dividend Aristocrats (25+ years of rising dividends)
- Dividend Kings (50+ years of rising dividends)
- Dow Jones 30 index
This list can be a good place to get ideas for your research blue chip dividend stock. It is important to remember that analyzing dividend growth streaks is backward-looking and not automatically a guarantee for future returns and dividends. The GE stock is a typical example that dividend cuts and removal for the Dow-30 can happen. Also, Ross Stores (ROST) has lost its Dividend Aristocrat status due to a dividend cut related to the COVID-19/corona-virus.
Investors should look beyond high-yielders and assess the business model and the company’s fundamentals such as free cashflow, payout ratio.
Top 10 Blue Chip Stocks With The Highest Dividend Yields
The 10 blue chip stocks with the highest dividend yields are presented in the table below.
- The Dividend Aristocrats Index is based on 64 companies part of the S&P 500 and with 25+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of less than 20 businesses with 50+ years of consecutive dividend increases.
- The MoneyInvestExpert Defensive Aristocrats is a performance-based top-10 selection of the Dividend Aristocrats to outperform the market in the long-term.
- Portfolio lists like the Berkshire Hathaway Portfolio or Bill Gates’stock portfolio can be a source.
- For the European focused investors, there is also the list of European Dividend Aristocrats.
- Dividend Champions are not necessarily members of the S&P 500 index, have increased their dividend for 25 or more consecutive years.
- 100+ years of dividend, the list of stocks that pay over 100 years of dividend can be a list of inspiration.
- Blue Chips stocks from the US or the European ones.
Blue Chip Stocks FAQ’s
While there is no precise definition of what makes a blue chip stock, a blue chip stock tends to be stocks of well-known, high-quality companies that are leaders in their industries.
The top 10 blue chip stocks based purely on market cap are Apple, Microsoft, Alphabet, Amazon, Facebook, Alibaba, Berkshire Hathaway, Visa, JPMorgan Chase, and Johnson & Johnson.
The top 10 blue chip stocks based on dividend yield are Exxon, Altria Group, AT&T, Universal Corp, Chevron, Dow, IBM.
Examples of blue chip stocks for example Dow-30 stocks such as AT&T, Coca-Cola, ExxonMobil, Johnson & Johnson, McDonald’s, JPMorgan Chase, Pfizer, Procter & Gamble, Apple, Microsoft, Berkshire Hathaway, Disney, Walmart.
The total number of blue chip stocks depends on the criteria used to define a blue chip stock. If you combine for example the Dow-30, Dividend King and Dividend Aristocrats, there are around 100+