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Why I Buy Blue

by Geoff Rhodes Investing

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:

  • ANZ
  • CBA
  • NAB
  • Wesfarmers
  • Westfield
  • Westpac
  • Woolworths.

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.

 

Disclaimer: The articles included are for general information only and have not taken into account a clients’ personal circumstances, goals or objectives. Prior to making any investment decisions you should contact us to ensure that the advice is appropriate to your personal needs and objectives.

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