Blue chip companies are reputed and well-established companies that are listed on the Global Stock Exchange. Companies which are governed by a very strong management team and have provided consistent results over a long period of time can be categorized as ‘Blue Chip Companies’. It was Oliver Gingold of Dow Jones who coined the term ‘blue chip’ for the superlative stocks in town. The highest denomination value of poker was valued at $25 back then in the 1920’s; and, the chip was blue in color, hence we get the name ‘blue chip’.
Now we are going to discover the top 5 reasons as to why you should invest your money with blue chip companies:
1. You can earn your dividends in a stable manner
If the business has really been doing well year after year, it receives stable earnings to be distributed among employees, shareholders, investors and stake holders. It simply means that the company has earned the trust of investors. This is a very good sign as the company has rooted its fundamentals right.
Hence, you can clearly come to a conclusion that if a stock has stable earnings, it is backed up by a strong management team which is doing something right, to take the company’s growth on a stable note. You can earn rich dividends on your investment portfolio and that is the first and the foremost expectation of all investments.
2. Timely payment of dividends
A solid trend which shows that the company is providing timely and consistent dividends to stock holders is treated as an icing on the cake among investors. This is simply because their income increases in tandem with their capital appreciation. You can earn consistent dividends with blue chip stocks. That is the primary reason, why blue chip companies or inventories are regarded as the best form of investments. Say, you receive a dividend of 20% on your investment, it means that your capital on your investment has risen by 20% at the same time as your earning potential in the form of dividends. Dividends are extra money over and above the value of your investment. Hence dividends are treated as cherry cakes among investors.
3. Aspect of strong financials
When a company is a blue-chip one, the company is also backed up by strong financials. It means that the company’s debt-equity ratio is ideal, the financial ratios of the aforesaid company are good, and it has an efficient operating cycle and so on. From the investor’s point of view holding such blue chip stocks simply means lesser volatility, minimal downside risks and ability to mitigate the risk portfolio in a better manner. These are the primary reasons as to why blue chip stocks are preferred over mediocre ones.
Blue chip stocks are slightly expensive but they provide a complete value for your money’s worth.
4. Diversification
If you are the kind of person, who loves taking risk, then diversifying your investment portfolio with series of blue chip stocks can actually make great sense. Even if you invest your money on risky blue chip stocks, these companies can easily minimize your losses on account of the excellent operational efficiency these companies are backed with. Blue chip businesses are blessed with diversified business lines, demographics and multiple revenue generating channels. These are factors that help mitigate losses as they would otherwise fall on the hands of the investors.
5. Goodwill and brand
Blue chip companies share a very good reputation and goodwill among the daily households. These are companies that have a competitive advantage over newly emerging companies or incompetent competitors. Cost efficiency, goodwill, easy accessibility to franchisees and distribution control are aspects that make blue chip companies to emerge as market leaders. When you have bought a sprite or a Coco Cola can, no one will question you about the brand factor and so as a Head and Shoulders Shampoo from P & G (Proctor and Gamble).
Some of the blue chip companies are Proctor and Gamble, Nestle, Mc Donald’s, Coco Cola, Unilever, Common Wealth Bank, Reliance Petroleum, Shell and Infosys. These are in the Fortune 500 companies list as well. Blue chip companies provide you with very good investment options and you have discovered the top 5 reasons as to how. Look out for blue chips stock list and you will know that your money is in safe hands.