Why I Buy Blue

What is blue-chip stock? And why should you care?

The term blue-chip is said to come from poker, where blue chips are the most expensive chips. For example, if a white chip is worth $1, a red chip is generally worth $5 and the blue chip is worth $25.

Today, the term is associated with stocks that are high in quality, with a history of paying stable or rising dividends, over many years and sometimes decades.

Typically, blue-chip stock has a market capitalisation in the billions, coming from companies that are well-established. Often, they are also market leaders (or at least the top 3) in their sector.

In 2013, these included organisations such as:

  • ANZ
  • CBA
  • NAB
  • Wesfarmers
  • Westfield
  • Westpac
  • Woolworths.

The reason I like them so much is because of their history of paying dividends even during the financial crisis of 2009. And because the majority of blue chips pay a fully-franked dividend, they are particularly attractive to members of SMSF who are in the Pension phase.

Disclaimer: The articles included are for general information only and have not taken into account a clients’ personal circumstances, goals or objectives. Prior to making any investment decisions you should contact us to ensure that the advice is appropriate to your personal needs and objectives.

Last Modified on October 21, 2019
This entry was posted in Investing
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