Blue chip stocks are the shares of well-known, high-quality companies that are leaders in their industries. These companies have stood the test of time and are respected by their customers and shareholders.

Blue chip companies have solid business models and an impressive set of returns for investors. These returns often include regular and increasing dividend payments, making blue chip stocks among the most popular for conservative investors. But even more risk-tolerant investors should consider buying blue chip stocks to better diversify their portfolios and provide some stability during stock market turbulence.

In short, what are blue chip stocks? A blue chip stock is defined as a security representing an equity position in a company that possesses most of the following characteristics:

• An industry leader with a reliable business model.
• A proven track record and strong reputation among consumers and shareholders.
• A history of strong returns over the long term.
• Paying dividends to shareholders and regularly increasing payouts. Even if you have never invested in the stock market, you will recognize the names of many of the major blue chips. These large-capitalization companies provide products and services that are part of the daily lives of billions of people around the world. Here are some of the best blue chip companies on the market:

1. Apple Apple (NASDAQ:AAPL) is one of the world’s largest companies and, throughout its history, has pioneered advances in the technology industry. The company innovated with its Macintosh computers in the 1980s, made media portable with its iPods in the early 2000s, and its iPhones, iPads, and Apple Watch are ubiquitous today. In a world where consumers flock to the latest technology fads, Apple’s products engender considerable loyalty from its customer base.

Apple also earns recurring revenues through its services, which include iTunes, App Store, and streaming television. Apple’s market capitalization surpassed the $1 trillion mark in 2018 before rising to an unprecedented $2 trillion in 2020. On January 3, 2022, Apple made history again by briefly rising to around the $3 trillion mark, although in early 2022 its market capitalization declined along with that of many other NASDAQ companies. However, today Apple remains the largest public company and its business is still growing.

2. Berkshire Hathaway Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is a major player in the insurance industry, offering several lines of commercial and personal insurance through subsidiaries GEICO and Gen Re. But Berkshire also owns a number of different businesses, such as restaurant chain Dairy Queen, railroad giant BNSF, and utility company Berkshire Hathaway Energy. With such a wide range of businesses, the company has a reputation for safety and security as well as consistent performance.

Importantly, Berkshire Hathaway is the only blue chip on this list that does not pay a dividend. CEO Warren Buffett has one of the most impressive records of market returns in history and prefers to invest the company’s cash instead of paying dividends. So far, this strategy has worked great for shareholders.

3. Coca-Cola Coca-Cola (NYSE:KO) has been a leader in the beverage industry for more than a century, when its namesake soft drink spawned a global empire. However, Coca-Cola has also changed with the times and now offers a much broader range of products, including juices, sports drinks, and bottled water, designed for health-conscious consumers.

Coca-Cola stands out in particular for its dividend increases. Its streak of consecutive annual dividend increases dates back to the early 1960s, a record that places it among the top 10 dividend stocks in the market.

4. Johnson & Johnson Johnson & Johnson (NYSE:JNJ) is known for its popular consumer products, including baby shampoo, Band-Aids, and the painkiller Tylenol. But J&J is a true healthcare giant, producing a wide range of medical devices to help doctors and other medical professionals perform life-saving procedures. Johnson & Johnson also has a large pharmaceutical business and produces drugs such as Remicade for arthritis, Zytiga for prostate cancer, and Stelara for psoriasis.

J&J will split into two companies by November 2023, and this is something to keep an eye on. One company will focus on consumer health products, considered the weakest segment of J&J’s business. The other will contain its prized pharmaceuticals and medical devices segment.

5. American Express Financial giant American Express (NYSE:AXP) is another blue chip to consider. It is both a credit card company and a payments network. Its main revenue generators are credit card fees and transaction processing fees. The company is poised to increase both revenue streams through new users and increased transaction volume. It is more than 170 years old, but apparently still relevant: More than half of new card accounts in 2021 were from millennial and Gen Z consumers, an encouraging sign.

American Express management believes it can increase profits by double digits in the years ahead and plans to distribute about a quarter of profits as dividends to shareholders. It has already increased the dividend by 20 percent in 2022 (starting June 2022). Continued earnings growth is expected to lead to further increases in future years.

A broader list of blue chips.

Investors have a considerable number of blue chip stocks to choose from. Here is a list of 20 more top blue chip stocks:

• AbbVie (NYSE:ABBV)
• Nike (NYSE:NIKE)
• Lockheed Martin (NYSE:LMT)
• Honeywell International (NASDAQ:HON)
• Procter & Gamble (NYSE:PG)
• Mastercard (NYSE:MA)
• JPMorgan Chase (NYSE:JPM)
• Walmart (NYSE:WMT)
• Microsoft (NASDAQ:MSFT)
• Caterpillar (NYSE:CAT)
• UnitedHealth Group (NYSE:UNH)
• Starbucks (NASDAQ:SBUX)
• Oracle (NYSE:ORCL)
• Northrop Grumman (NYSE:NOC)
• McDonald’s (NYSE:MCD)
• Home Depot (NYSE:HD)
• Kroger (NYSE:KR)
• Merck (NYSE:MRK)
• Intel (NASDAQ:INTC)
• Goldman Sachs (NYSE:GS)

Investing in blue chip companies.

Blue chip stocks are a smart choice for investors of all types. Beginning investors are probably familiar with the products and services of blue chip companies. Familiarity with a company makes it easier to buy shares, and it is exciting to become partial owner of a company you know. Meanwhile, long-time investors will have seen blue chip stocks rise to the top over the long term, outperforming their weaker rivals and finding ways to stay relevant and continue to grow even as their sectors change.

Investors of all experience levels can appreciate the stability and reliability that blue chip companies offer shareholders. Many of these companies pay substantial dividends and have a streak of payout growth that has earned them a place among the illustrious ranks of Dividend Aristocrats and Dividend Kings.

Practical investing with blue chip funds.

Investors can also consider exchange-traded funds (ETFs) and mutual funds. These blue chip funds group multiple blue chip stocks into a single security, offering an easy way to diversify among many high-quality stocks. These investment vehicles also tend to be less volatile than individual stocks, which can be particularly attractive to people in or near retirement. Blue chip funds may also be suitable for younger investors who seek the defensive benefits of diversification or who do not have the time to adequately research individual stocks.

Blue chips in a well-balanced portfolio.

If you are looking for maximum growth in your equity investments, you will also need to go beyond blue chip stocks to look at some small-cap emerging stocks of young, innovative companies looking to crush their larger rivals. These high-growth emerging companies aim to become the blue chips of tomorrow.

However, any investor can benefit from investing a portion of his or her portfolio in blue chip stocks. This is not necessarily a fixed percentage; investors have different views on how much risk they want to take on. However, the more you want to preserve and protect your money invested in the stock market, the more attractive blue chip stocks will be in an effort to meet your goals and achieve your long-term financial goals.