Blue-chip stocks

Usually, blue-chip companies were established many years ago and consistently boast a large consumer following, as well as boasting a high market capitalization of over one billion dollars. In turn, blue-chip stocks can be a particularly good investment for traders with a balanced portfolio. Blue-chip companies tend to have stable balance sheets and cash flows, meaning that even in uncertain times, they are likely to bounce back quickly from a bearish market​.

For example, throughout the global recession of 2007-2008, some international blue-chip companies that thrived on the stock market collapse include IBM, Procter & Gamble and PepsiCo, which are all US stocks​. This meant that successful brands were making enough profit to be able to increase dividend payouts to shareholders, increasing brand reputation and stability.

Blue-chip stocks are the shares of companies that are well-known and highly respected by both customers and business analysts alike. Blue-chip stocks are sometimes perceived as safe havens due to their stability within the financial industry. In periods of market uncertainty, investors may choose to trade blue-chip stocks in order to reduce their total risk exposure. Many blue-chip companies also pay out dividends to their investors.

The term “blue-chip” to describe a company as valuable and prestigious comes from a poker game. Typically, blue-chips hold the highest value in poker chip sets, so this term was first used to segregate the highest priced stocks in the market. Now, it holds a similar meaning but places more emphasis on the value and quality of the stock, rather than price only.

Below is a list of businesses with blue-chip status that are considered some of the wealthiest and most successful around the world with large market capitalizations, also referred to as large-cap stocks​. Please note that blue-chip companies are consistently fluctuating in value, along with their share price in the stock market, therefore this list is not in order.

The majority of blue-chip shares pay consistent dividends, which can contribute to a balanced trader’s investment portfolio. Some high dividend stocks branch from blue-chip companies including BP, Vodafone, GSK and Shell. The dividend yields for these stocks vary in percentage, with some offering a high figure of around 15%. These percentages can predict future blue-chip stock prices, with high dividends suggesting that the stock price may increase significantly.

Due to their long-standing financial security within the market, many traders consider blue-chip stocks to be a worthwhile investment, especially those with high dividend payout ratios. However, if you are considering investing in blue-chip companies, you should thoroughly review a company’s fundamentals in order to evaluate all elements that may affect your decision.

You can invest in blue-chip companies by buying and selling shares outright at spot price or with forward contracts, which are an agreement between a buyer and seller to exchange the asset for a future date, at a specified price. However, this can be a costly process as it involves a buy-and-hold approach, meaning that you can only trade on one side of the market.

An alternative method of investment is through derivative trading, which is better suited for short-term traders. Continue reading to find out how you can trade on blue-chip stocks using our derivative products.

Blue-chip stocks can be traded on through spread bets or CFDs, which are derivative products that allow you to speculate on the price movements of the blue-chip stock. This involves taking a position on whether you expect the price to rise or fall, and this will result in either profit or loss, depending on which way the market moves.

Spread betting, in particular, is our most popular product and allows you to trade tax-free in the UK*. With derivative products, you do not own the asset, which offers the potential for safer investments. However, please note that these are both leveraged products, therefore, this can greatly magnify any profits from the markets moving favourably in your direction, but in turn, it can also magnify the losses, as trading with leverage only requires a trader to place a deposit of the full trade value while giving increased exposure to the market.

We offer over 9,000 shares and exchange-traded funds on our award-winning online trading platform**, Next Generation, as well as all major stock indices. You can trade both blue-chip stocks and smaller-cap stocks, including those mentioned in this list, using our endless array of technical indicators, drawing tools and charts types for technical analysis. We encourage you to carry out some thorough research on which particular blue-chip shares are well suited for you. We have created a specific news and analysis section to keep our clients up to date with market changes and opportunities.

Blue-chip stocks are traded on a major stock exchange where the share is listed, such as the London Stock Exchange (LSE). This can be done through share trading, where you buy and sell shares at spot price with the aim of profiting from the difference. Blue-chip stocks can also be traded through stock indices, such as the Dow Jones or S&P 500, which are often traded in the long-term as they provide steady returns and dividend payouts.

It happens to be that many of the blue-chip companies on major exchange lists originated from small shares of public companies, referred to as “penny stocks”. The name derives from the stock being valued at less than one dollar, therefore these types of shares are considered highly speculative, as many traders will invest in the hopes that they continue to grow to the high quality level of blue-chip stocks. Read our complete guide to trading penny stocks here. These instruments are also available to trade on our Next Generation platform.

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