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A blue chip stock is a publicly traded company that is usually very large, may be distributing profits in the form of dividends for many years, is a leader in the sector in which it competes, has notable stability and growth, and has the ability to adapt to changing market conditions successfully.
It is thought by many that the term "blue-chip" was derived from gambling, specifically the card game "poker", where in betting, the use of the blue-colored chips represents the most expensive chip at the table.
Blue chip stocks are giant companies with solid reputations. Think of General Electric, Intel, Visa, Wal-Mart and Walt Disney — financially fit corporations with dependable earnings, usually paying additional income to investors in the form of dividends
Blue chip stocks are the best-of-the-best. But they aren’t crash proof. These heavyweights took a beating in 1973-74. Let’s consider their performance during the most severe market setbacks of the past 100 years
The greatest stock market crash of the 20th century wasn’t in 1929; it was in 1987 when the Dow Jones Industrial index lost almost 23% in one day. That’s the worst day’s performance in market history
A blue-chip stock is the stock of a large, well-established and financially sound company that has operated for many years. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector, and is more often than not a household name. While dividend payments are not absolutely necessary for a stock to be considered a blue-chip, most blue-chips have a record of paying stable or rising dividends for years, if not decades. The term is believed to have been derived from poker, where blue chips are the most expensive chips.
The blue chip company means a trusted one!
Your chances of failure with such companies are very rare.
And this all comes from the years of presence, sound management, good returns to the investors, transparent and acceptable standing in the industry etc. etc,
Where did the term blue chip originate? Why does it refer to a stock in the first place? It turns out, it's borrowed from the game of poker. When playing cards, the highest denomination of poker chip was - you guessed it - the blue chip. Generations ago, it became common for folks to say they were "buying a blue chip" or something along those lines, recognizing that certain stock positions had characteristics that made them long-term investments; that made them safer than the typical enterprise. That's the reason blue chips are the quintessential buy and hold investment; made to be acquired and put away in a bank vault for years, decades even, so you can live off the dividend income. Some folks even get so good at acquiring blue chip stocks, they turn minimum wage jobs into multi-million dollar fortunes, like the late janitor Ronald Read, who used his spare change to buy them for 50+ years to the point that when he died, they found a five-inch thick stack of stock certificates in his safe deposit box and discovered he had been sitting on $8,000,000+ in shares.
To learn more about the topic, you might want to read an article called The Benefits of Owning Blue Chip Stocks. I also do case studies of blue chip stocks on my personal blog, examining firms like Hershey or Coca-Cola, the latter of which might arguably the greatest blue chip stock of all time as a single share bought for $40 in the IPO back in 1919, with dividends reinvested, is now approaching $15,000,000 in market value. It sounds crazy but it's true. Many people don't realize Coke actually owns much more than soft drinks. By now, they generate money from 3.5% of all beverages consumed on the planet, including tap water. Year after year, decade after decade, the dividend gets hiked and investors get richer despite sometimes suffering the vicissitudes that are endemic to equity ownership.
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Blue chip stock play a vital role in the favor of company to pay shareholders in the way of dividends for future safe by the company
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