Blue chip stocks are the foundation of investment portfolios far and wide for good reasons. The first is familiarity — many blue chips are household names.
Investors are drawn to the so-called blue chips because they are the biggest companies in the world. Their market caps are measured in billions, hundreds of billions or even trillions of dollars and their brands are recognized worldwide. They’re the companies that have proven able to weather the market’s ups and downs, surviving downturns, bear markets and even full-blown recessions. They’re not foolproof — no equity investment is — but these known quantities take some of the guesswork out of stock analysis and selection.
Keep reading to learn more about the biggest and best-known companies — and to get acquainted with some of the best blue chip stocks on the market.
Is It Smart To Invest in Blue Chip Stocks?
The only smart investment is the one that matches your strategy, goals and risk tolerance.
That, however, does not mean that blue chips are right for everyone.
For example, investors who are looking for fast and aggressive gains, and who are game for a whole lot more risk, might be better suited with small-cap stocks. Since blue chips are already so enormous, they typically don’t have much more room to grow. Income investors, on the other hand, might be better off with REITS — real estate investment trusts are required by law to return 90% of their taxable income back to investors as dividend payments.
Which Blue Chip Stock Is Best?
The best blue chip stock is going to be different for every investor. For example, big-name tech stocks typically pay only nominal dividends or — in the case of Amazon and Meta — don’t pay any dividends at all.
That’s because they reinvest all their available money back into the company to grow and expand. Therefore, blue chips like that wouldn’t be the right choice for income investors, but they could be good for growth investors who were willing to shoulder a little more risk.
What Blue Chip Stock Pays the Highest Dividend?
Many blue chips pay above-average dividends — with so much cash and so many revenue streams, the biggest companies in the world can afford to give back to their shareholders. According to YCharts, the average dividend yield of the S&P 500 — which represents the 500 biggest U.S. companies and is the home of the blue chips — is 1.69%.
Some, however, go above and beyond.
The biggest dividend of all comes from the Monroe, Louisiana-based telecom, Lumen Technologies, which delivers a massive yield of 9.29%.
Is Pfizer a Blue Chip Stock?
Founded in 1849, Pfizer is one of the oldest companies in America, and with a market cap of nearly $263 billion, it’s also one of the largest. It’s included in the S&P 500, which makes it one of the 500 largest U.S. companies.
The pharmaceutical giant Pfizer is most definitely a blue chip stock — and as you’ll see, many investors consider it one of the best.
Five of the Best Blue Chip Stocks
As previously stated, there is no blue chip stock that will be the best choice for all investors, but the following are some of the best-known, top-performing and most popular blue chip stocks.
1. Pfizer (PFE)
Pfizer has delivered its shareholders enormous gains of 3,738% since the early 1980s. But it’s down nearly 18% on the year, which means it could be a good deal for buyers looking for sales. Its revenue in 2022 alone is $81.5 billion — it logged $22 billion in profits and owns assets totaling $181.5 billion.
A rock star of the pandemic era, Pfizer dethroned AbbVie’s Humira as the best-selling drug in the world in 2021. Its Comirnaty COVID-19 vaccine generated $36.8 billion in sales last year, the most for any pharmaceutical product in history.
2. Coca-Cola (KO)
A longtime favorite of Warren Buffett, Coca-Cola is arguable the most instantly recognizable brand in the world and an intractable part of American culture. The company sold 25 bottles of soda during its first year in business. Today, it sells 1.9 billion per day as the world consumes 10,000 Coca-Cola soft drinks per second.
It has a market cap of $272.93 billion and operates in more than 200 countries on every continent except Antarctica. It owns more than 200 companies, including Schweppes, Sprite, Vitaminwater, Minute Maid, Fanta and Fuze Tea.
3. Amazon (AMZN)
The No. 2 biggest retailer in the world behind only Walmart, Amazon is the undisputed king of e-commerce. Its business model proved especially durable during the pandemic, and a recent stock split slashed the price of a share from more than $3,000 to about $130 today. Not only is that a much more affordable chunk of change to the typical investor, but its stock is down more than 23% on the year, which makes it a steal for anyone looking for discounts.
Amazon had a rough run after missing earnings expectations in the first quarter of the year — that’s part of the reason it’s currently trading at a discount. In the second quarter, however, the stock bounced back some and Amazon appears to be regaining traction once again.
4. Apple (AAPL)
Arguably the ultimate blue chip stock, Apple became the first company ever to achieve a $1 trillion market cap in 2018. In January 2022, it became the first company to reach $3 trillion. Founded in a garage by Steve Wozniak and Steve Jobs in 1976, Apple was at the forefront of every major innovation in the digital age, including personal computers, laptops, tablets, mp3 players, smartwatches and smartphones.
Its 2022 revenues are $378.7 billion. It earned more than $100 billion in profits.
5. Walmart (WMT)
Still the world’s biggest retailer, Walmart bucked the trend of brick-and-mortar stores succumbing to the onslaught of e-commerce. It now has a market cap of $360.74 billion and operates more than 10,500 stores. Throughout all the ups and downs of the last five years, Walmart has delivered its shareholders gains of roughly 70% — and a 1.7% dividend.
Don’t See Anything You Like? Consider These Other Top Blue Chip Stocks
- AbbVie (ABBV)
- Berkshire Hathaway (BRK)
- Nike (NIKE)
- Lockheed Martin (LMT)
- ONEOK, Inc. (OKE)
- Honeywell International (HON)
- International Business Machines Corporation (IBM)
- Procter & Gamble (PG)
- DTE Energy Company (DTE)
- The Hershey Company (HSY)
- Walt Disney Co. (DIS)
- Mastercard (MA)
- Microsoft (MSFT)
- Marathon Petroleum Corporation (MPC)
- McDonald’s Corporation (MCD)
Blue chip stocks are among the safest and most secure buys that equity investors can add to their portfolios, which is why most experts advise novices to start their investing journeys with brand-name companies.
But don’t let that fact lull you into a false sense of security.
Like every company that has ever existed, blue chips can be rendered obsolete by new technology and disruptive startups, or they can fall victim to bad management or scandals.
Blockbuster Video, for example, was once as ubiquitous as Starbucks, until one of today’s most popular blue chips, Netflix, rendered it a relic of the past. Sears, Roebuck and Co., later Sears Holdings, spent decades as America’s largest retailer. Today, no more than 20 remain. Enron was one of the biggest energy companies in the world — until it was revealed as a well-organized criminal conspiracy.
Blue chips tend to be safer and more stable than smaller companies thanks to their cash, clout, name recognition and resources — but always stay tuned-in and actively involved with your holdings. In equity investing, setting and forgetting a portfolio that you expect to run on autopilot is a recipe for regret.
Information is accurate as of Aug. 29, 2022.
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