Blue-Chip Stock

The term comes from poker, where blue chips traditionally have the highest value. Blue-chip companies are typically leaders in their industries, with strong brands, stable earnings and the ability to survive economic downturns.

Examples are often found among the largest companies in major stock market indices, in sectors such as consumer goods, healthcare, technology, finance and industrials.

For example, a global consumer products company that has sold household brands for decades, grown steadily and increased its dividend for many years would often be described as a blue-chip stock.

Investors buy blue-chip stocks for their perceived stability, dividend income and lower risk compared with smaller or newer companies. They often form the core of long-term portfolios.

Blue-chip status does not guarantee safety. Large, well-known companies can still face serious difficulties from changing technology, poor management or scandals, and some former blue chips have declined significantly or failed. Their share prices also fall during broad market downturns, even if usually less dramatically than those of riskier companies.