In 1923, Oliver Gingold, who worked at Dow Jones, came up with the term “blue chip” to talk about stocks. He used it to describe stocks that were worth $200 or more per share. This term comes from “poker chips”, which are usually blue, white, and red. In poker, blue chips have the highest value.
However, today, when we talk about blue chip stocks, we don’t necessarily mean stocks that cost a lot. We’re referring to stocks of high-quality companies that can remain stable despite market fluctuations. In other words, they are a category of stocks that are stable, valuable and established. They’re mostly stocks of top and well-established names.
What are Blue Chip Stocks?
Blue chip stocks are typically part of well-known market indexes like the Dow Jones Industrial Average, the Standard & Poor’s (S&P) 500, and the Nasdaq-100 in the United States. In Canada, they’re part of the TSX-60, and in the United Kingdom, they’re linked to the FTSE Index. These stocks are usually found on major stock exchanges like the NYSE, and the Nasdaq and usually pay dividends. Let’s look at some examples.
Examples of Blue Chip Stocks in Nigeria
Cadbury Nigeria PLC (CADBURY)
Flour Mills of Nigeria (FLOURMILL)
Unilever Nigeria PLC (UNILEVER)
Guinness Nigeria (GUINNESS)
Nestle Nigeria PLC (NESTLE)
Transcorp PLC (TRANSCORP)
Dangote Cement
MTN Nigeria
Zenith Bank
Seplat
FBN Holdings
Stanbic IBTC
Wema
Airtel Africa
Seplat
BUA Cement
PepsiCo
Other Examples of Foreign Blue Chip Stocks
Apple
Alphabet
Berkshire Hathaway
Amgen
UnitedHealth Group
Nike
Proctor & Gamble
Chevron
Walmart
IBM Corp.
McDonald’s
Caterpillar
IBM CorpMicrosoft
American Express
McDonald’s
Boeing Co.
How to Trade Blue Chip Stocks
You can invest in them by using online brokerage firms or by investing in blue-chip funds. Because some of them have expensive shares, some people choose to invest in them through fractional trading options like Trove Finance which is easier and straightforward.
Advantages and Disadvantages of Investing in These Stocks
| Advantages | Disadvantages |
| Robust financial performance | Limited potential for high returns |
| Possibility of consistent dividend payouts | Relatively low dividend yields |
| Reduced risk of significant losses | Slower capital growth |
| Lower susceptibility to price fluctuations | May not outperform benchmark or index returns |
| Steady, reliable long-term returns | Typically lacks the potential for substantial gains (multi-bagger) |
Read Also: Dividend Stocks: What it Means and How it Works
Are Blue Chip Stocks a Good Investment?
They are usually seen as very safe investments because they come with strong financial foundations, consistent cash flows, well-established business models, and a history of growing dividends. This track record and performance history make them a reliable choice for investors. That’s also why you’ll see the term beside only the top companies in the stock market.
