You may have heard about blue-chip stocks if you’ve been researching investment tips. However, you might not be too sure what they actually are, or why they’re so special. Here, we’ll take a closer look at what blue-chip companies actually are and why they’re such a strong investment choice so you can decide for yourself whether 2020 will be the year when you invest in these stocks.
Blue Chip Stocks – An Overview
If you read some of the best personal finance blogs, you’ll find that blue-chip companies are those which are financially sound and well-established, having been in operation for years with reliable earnings. If you’re looking for a relatively safe investment opportunity, blue-chip stocks are probably your best investment.
So, where does the name “blue chip” come from? It actually originates from blue chips that are used during a game of poker. At most poker tables, blue chips are those with the greatest value, and this has translated into the companies that are most valuable in terms of their stock market potential.
With this in mind, it isn’t too surprising that blue-chip stocks are leading the market and are very popular with investors. As household names, these companies are worth huge sums and have an important role to play in shaping the economy.
However, be aware that, even when a company’s market cap is several billion dollars, it won’t necessarily be a blue-chip stock. There aren’t any clear guidelines about what constitutes a blue-chip company, but generally, they will have a minimum $5 billion market capitalization and will have been earning stable revenue for many years.
So, keeping things simple, even if you have absolutely no experience of trading, you’ll be able to discuss a blue-chip company without any difficulties.
Dividends And Blue Chip Stocks
One major characteristic of blue-chip stocks is their dividend yields. These big-name companies pay their shareholders a proportion of the profits of the company as a dividend. These are paid out quarterly after the company’s earnings are released. One way of taking advantage of a dividend is to reinvest it back into even more company shares. This enables you to buy more stock in the company without having to invest any more of your own money. As a result, in the following quarter, you’ll get even more dividends.
Which Blue Chip Stocks Offer High Dividends?
There are many blue-chip companies that pay out high dividends to their investors. Here are some of those that offer the highest dividends:
- AT&T – 6.6%
- Dominion Energy – 4.6%
- Bank of Nova Scotia – 4.5%
- Verizon Communications – 4.3%
- Royal Dutch Shell – 6.0%
Considering Investment In Blue-Chip Companies? Here Are Some Benefits
Although there is no such thing as a risk-free investment in the stock market, blue-chip stocks represent the nearest thing. As these stocks are slow-moving, you won’t usually receive any unexpected information that would move their stock price significantly.
As these companies are well-established and older, they are easier for you to follow as a new investor. There is no shortage of information about them online, and you can even read about them on a regular basis in local newspapers.
If you want peace of mind in your investments, blue-chip stocks are the way to go. There’s no need to watch every single price movement. Rather, you can just let them do their thing, then collect your returns and dividends with minimal effort.
Are You Ready To Invest In High Dividend Blue Chip Stocks?
Anybody can buy blue-chip stocks as long as they have a regular brokerage account. There’s no need to find a specialist broker – these stocks can easily be accessed. If you’re interested in making a long-term investment or are looking for a good choice for your first foray into the markets, high dividend blue chip stocks could be the perfect choice for you in 2020.