What is blue-chip stock? And why should you care?
The term blue-chip is said to come from poker, where blue chips are the most expensive chips. For example, if a white chip is worth $1, a red chip is generally worth $5 and the blue chip is worth $25.
Today, the term is associated with stocks that are high in quality, with a history of paying stable or rising dividends, over many years and sometimes decades.
Typically, blue-chip stock has a market capitalisation in the billions, coming from companies that are well-established. Often, they are also market leaders (or at least the top 3) in their sector.
In 2013, these included organisations such as:
The reason I like them so much is because of their history of paying dividends even during the financial crisis of 2009. And because the majority of blue chips pay a fully-franked dividend, they are particularly attractive to members of SMSF who are in the Pension phase.