Blue Chip Stocks

(2 of 7)

Blue Chip Stocks

The term blue chip comes from poker, where traditionally the blue chips carry the highest value. Large, established firms that are considered high-quality, dividend-stable, and financially solid are sometimes referred to as blue chip stocks.

Blue chip companies are leaders

These firms are leaders in their industries and are considered likely to grow for a long time. Because of this, they often set the standards by which other companies in their fields are measured. Well-known blue chips include IBM, Coca-Cola, Boeing, and McDonald’s.

The Dow Jones Industrial Average comprises 30 blue chip stocks. Blue chips are also included on the S&P 500 and NASDAQ indexes. These make up a significant portion of the total market value of stocks listed on the New York Stock Exchange.

Who seeks blue chips?

Investors who seek investments that tend to pay steady dividends and that also grow are attracted to blue chip stocks. These stocks can be priced high because of their demand and attributes, have relatively low volatility, and deliver a steady stream of dividends. The main downside is that, since they are so large, they may not grow as quickly when compared to smaller, up-and-coming stocks.

Learn more about the risks of blue chip stocks.