Blue chip stocks are the stocks of well-known, high-quality companies that are industry leaders. These companies have stood the test of time and are respected by their customers and shareholders.
Blue chip companies have solid business models and impressive track records of returns for investors. These returns often include regular and growing dividend payments.
The blue chip stocks' attractive risk-reward profiles make them among the most popular for conservative investors. But even more risk-tolerant investors should consider buying blue chip stocks to diversify their portfolios better and provide stability during turbulent stock market conditions.
What is a blue chip stock?
What is a blue chip stock?
So, in short, what are blue chip stocks? A blue chip stock is defined as a security that represents an equity position in a company possessing most of the following characteristics:
- An industry leader with a dependable business model
- A proven track record and strong reputation with consumers and shareholders
- A history of delivering strong returns over the long term
- Dividends paid to shareholders and regular increases to its payouts
Best blue chip stocks to buy right now
Best blue chip stocks to buy right now
Even if you've never invested in the stock market, you'll recognize the names of many top blue chip stocks. These large-cap companies provide products and services billions of people worldwide use daily. Here are some of the best blue chip companies on the market:
| Blue Chip Companies | Market Cap |
|---|---|
| 1. Apple (NASDAQ:AAPL) | $3.03 trillion |
| 2. Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) | $772.2 billion |
| 3. Coca-Cola (NYSE:KO) | $270.1 billion |
| 4. Johnson & Johnson (NYSE:JNJ) | $444.6 billion |
| 5. American Express (NYSE:AXP) | $123.5 billion |
1. Apple
1. Apple
Apple (AAPL 0.74%) is one of the most profitable companies in the world. It has pioneered advancements in the technology sector throughout its history.
The company innovated with its Macintosh computers in the 1980s, made media portable with its iPods in the early 2000s, and its iPhones, iPads, and Apple Watches are ubiquitous today. In a world where consumers flock to the latest tech fads, Apple's products engender notable loyalty from its customer base.
Apple also earns recurring revenue through its services, which include its iTunes, App Store, and streaming television businesses. Apple's market capitalization climbed above the $1 trillion mark in 2018, up to an unprecedented $2 trillion in 2020, and on Jan. 3, 2022, it once again made history by briefly climbing above the $3 trillion mark.
Revenue
The company's valuation fell amid bearish momentum for the broader market but subsequently rebounded above that threshold. Today, Apple remains the largest public company -- and the business still has plenty of room for growth over the long term.
2. Berkshire Hathaway
2. Berkshire Hathaway
Berkshire Hathaway (BRK.A 0.39%)(BRK.B 0.43%) is a major player in the insurance industry, offering various lines of commercial and personal insurance through subsidiaries GEICO and Gen Re. But Berkshire owns a diverse set of businesses.
For instance, Berkshire owns restaurant chain Dairy Queen, railroad giant BNSF, and Berkshire Hathaway Energy utility company. With such a broad range of businesses, the company has a reputation for safety, security, and consistent performance.
It's important to note that Berkshire Hathaway is the only blue chip stock on this list that doesn't pay a dividend. CEO Warren Buffett has one of the most impressive track records of market-beating returns in history and prefers investing the company's cash in lieu of paying dividends. That strategy has worked out great for shareholders so far.
3. Coca-Cola
3. Coca-Cola
Coca-Cola (KO -1.04%) has been a leader in the beverage industry for more than a century, as its namesake soft drink spawned a global empire. Yet, Coca-Cola has also changed with the times and now provides a much broader array of products, including juices, sports drinks, and bottled water tailored for more health-conscious consumers.
Coca-Cola particularly stands out for increasing its dividend. Its streak of consecutive annual dividend payment increases dates back to the early 1960s, a track record placing it among the top 10 dividend stocks on the market.
4. Johnson and Johnson
4. Johnson & Johnson
Johnson & Johnson (JNJ -0.15%) is well-known for its popular consumer products, including baby shampoo, Band-Aids, and Tylenol pain reliever. But J&J is a true healthcare giant, making a wide array of medical devices to help doctors and other medical professionals perform life-saving procedures.
Johnson & Johnson also has a vast pharmaceutical business and produces drugs such as the arthritis treatment Remicade, prostate cancer drug Zytiga, and psoriasis drug Stelara.
J&J is splitting into two companies by November 2023, and this is worth watching. One company will focus on consumer health products, considered the weaker segment of J&J’s business. The other will contain its highly regarded pharmaceuticals and medical devices segment.
5. American Express
5. American Express
Financial giant American Express (AXP 0.1%) is another blue chip stalwart to consider. It's both a credit card company and a payments network. Its main revenue generators include credit card fees and transaction processing fees.
The company is poised to increase both revenue streams with new users and higher transaction volume. It's more than 170 years old, but it's apparently staying relevant: More than 60% of new card accounts in 2022 were millennial and Gen Z consumers -- an encouraging sign.
American Express's management believes it can expand profits at a double-digit pace in years to come, and it plans to pay out roughly a quarter of its profits as shareholder dividends. It's already raised its dividend by 15% in 2023 as of April 2023. Ongoing earnings growth should lead to additional increases in future years.
Gen Z
A bigger list of blue chips
A bigger list of blue chips
Investors have a sizable number of blue chip stocks to choose from. Here's a list of 20 additional top blue chip stocks:
- AbbVie (ABBV 1.25%)
- Nike (NKE -0.28%)
- Lockheed Martin (LMT -0.18%)
- Honeywell International (HON 1.1%)
- Procter & Gamble (PG -0.61%)
- Mastercard (MA 0.07%)
- JPMorgan Chase (JPM 0.49%)
- Walmart (WMT 0.44%)
- Microsoft (MSFT 0.17%)
- Caterpillar (CAT 0.44%)
- UnitedHealth Group (UNH 0.83%)
- Starbucks (SBUX -1.0%)
- Oracle (ORCL -0.67%)
- Northrop Grumman (NOC 0.16%)
- McDonald's (MCD -0.9%)
- Home Depot (HD 0.25%)
- Kroger (KR 0.11%)
- Merck (MRK -0.47%)
- Intel (INTC 0.32%)
- Goldman Sachs (GS 0.29%)
Investing in blue chip companies
Investing in blue chip companies
Blue chip stocks are smart choices for investors of all kinds. Beginning investors are likely familiar with the products and services of blue chip companies. Familiarity with a company makes stock buying more comfortable, and it's exciting to become a partial owner of a business you know.
Meanwhile, long-time investors will have seen blue chip stocks rise to the top over the long haul, outlasting their weaker rivals and finding ways to stay relevant and continue growing, even as their industries change.
Investors of all experience levels can appreciate the stability and reliability blue chip businesses give to shareholders. Many of these companies pay great dividends and have payout growth streaks that have earned them a spot among the illustrious ranks of the Dividend Kings.
Hands-off investing with blue chip funds
Investors may also want to consider exchange-traded funds (ETFs) and mutual funds. Blue chip-focused ETFs and mutual funds bundle numerous blue chip stocks into a single security, offering a simple way to diversify across many high-quality stocks.
These investment vehicles also tend to be less volatile than individual stocks, particularly appealing to people who are retired or nearing retirement. Blue chip ETFs and mutual funds can also be a good fit for younger investors seeking the defensive advantages of diversification or who don't have the time to adequately research individual stocks.
Alternatively, blue chip ETFs can offer a narrower concentration of high-quality stocks than an S&P 500-tracking ETF or a Nasdaq-tracking ETF.
Related investing topics
Blue chips in a well-balanced portfolio
If you're looking for maximum growth in your stock investments, you'll also want to go beyond blue chip stocks to look at some up-and-coming small-cap stocks of innovative young companies seeking to disrupt their larger rivals. These high-growth upstarts aim to be the blue chip stocks of tomorrow.
However, just about every investor can benefit from having a portion of their portfolio invested in blue chip stocks. It doesn't have to be a set percentage; investors will have varying viewpoints about how much risk they want to assume.
But the more you want to preserve and protect the money you have invested in the stock market, the more attractive blue chip stocks will be as you try to meet your objectives and reach your long-term financial goals.
FAQs about blue chip stocks
What are blue chip stocks?
Blue chip stocks are stocks of large,?well-known, and widely respected companies. Most of these companies pay dividends and have many decades of profitable operation under their belts.
Is Amazon a blue chip stock?
Depending on how the term is defined, Amazon can be considered a blue chip stock.?The company is a leader in the e-commerce and cloud services markets and is highly respected by customers and shareholders. These qualities support its classification as a blue chip.
On the other hand, the company doesn't pay a dividend, which disqualifies it from being a blue chip stock under some stricter definitions.?Founded in 1994, Amazon is also relatively young compared to other companies in the category and didn't record its first annual profit until 2003.
Is Target a blue chip stock?
Target can be considered a blue chip stock. The company has been in operation since 1902 and enjoys a strong?position in the retail market. With the exception of a one-off net loss in 2015, the company has been consistently profitable for decades. Additionally, Target reliably pays a dividend and has increased its payout annually for 55 years straight.
