Blue Chip Dividend Stocks For Long Term Investing

Many new investors are always on the hunt for the hottest and most popular stocks with the hopes of making huge returns. As you do more research in these stocks, you will come across the term “blue chip dividend stocks” quite often. Before you start searching for a list of blue chip stocks it is important to know what exactly they are and why they are so popular. Below are some frequently asked questions concerning dividend paying blue chip stocks, reasons for their popularity, and a list of 30 popular stocks that pay dividends as an example.

What are Blue Chip Stocks?

If you’ve ever played a game of poker, you might be familiar with the different colored chips used. The term “blue chip” was coined because in the game of poker, the blue chips hold the highest value and are worth the most. In stocks, these companies labeled as “blue chip” are often strong performing, highly valuable companies.

In simple terms, these companies are massive, deep-rooted, profitably sound and have been in business for a multitude of years. A blue chip stock company is often among the top companies in its sector and the company itself has a name you probably were aware of long before you ever even thought about investing.  

A blue chip stock is typically characterized by two things: an enormous market cap, often in the billions, as well as dividends paid out to shareholders. Here we will look at why these things are important for investors to research and be knowledgeable about.

Understanding Market Caps

Market cap is a short way of saying market capitalization. Market Capitalization is the stock price multiplied by the total amount of outstanding shares.  Outstanding shares refers to a company’s stock presently held by all its shareholders. This includes shares owned by companies such as banks, insurance companies, investment advisors etc. It also includes shares that only company officers and insiders have access to.

Many investors believe that market cap is an important factor in determining whether a stock is worth investing in. The rationale is that the more people who trade a stock, the more stable the stock tends to be.

For example, imagine your Aunt Sally owns one share of stock in her own company. Then she decides to go to Florida and retire. Her company is over and there is no market cap in this example.

Now, imagine a huge corporation that’s been in business for decades. They have millions of shareholders. With this many shareholders, it can be more difficult for a stock to fail, because if one shareholder retires to Florida it’s not even going to be a drop in the ocean. However, this is not fool-proof – even large corporations are still at risk for bankruptcy or external factors which can influence their stock’s performance.

Understanding Dividends

Companies will share a portion of their profits with their shareholders, called a dividend. Dividends are payments paid on a regular basis by a company to its shareholders out of the profits it earns.

There are pros and cons to a stock that pays dividends. On the bright side, you may receive a payment on a periodic basis which you could use to buy more shares or for your own personal use. However, because these companies are essentially giving away a portion of profit, they are not reinvesting into their own business, which can sometimes cause the stock price to be sluggish and slow moving.

Why are High Dividend Blue Chip Stocks so Popular?

Dividend paying stocks are most popular when using a long term investment strategy. They are not well suited for swing trading, day trading or any other type of short term investment strategy. These are stocks which in order to see a return on them, you will want to plan to hold on to them for a minimum of ten years – often the longer the better.

These stocks are popular because some of the wealthiest investors on earth have made billions of dollars by investing in high paying blue chip stocks that pay dividends. Also, if a company pays a dividend, you can get periodic cash payments that you can spend or reinvest into the stock. In doing so, you can acquire more shares. The longer you hold on to blue chip stocks the better your chances become that you will earn nice profits.

Are there any drawbacks to dividend paying blue chip stocks?

No stock is perfect. Even blue chip stocks can go bankrupt and you can lose every dime invested in them! Also, some investors better known as traders prefer a stock with a higher risk such as penny stocks because with higher risk comes the possibility of much higher rewards.

Here are a few Examples of Blue Chip Stocks that Pay Dividends:

I have compiled a list of 30 blue chip dividend stocks (listed by company name) in alphabetical order so that you can get a better idea of the concept so you can research these companies to make your own informed choices. Here is the list:

• ADP
• American Capital Agency Corp
• American Express
• Apple
• AT&T
• Clorox
• Coca-Cola
• Colgate Palmolive
• Eli Lilly & Co.
• General Mills
• General Motors
• Goldman Sachs
• H&R Block Inc.
• IBM
• John Deere
• Kellog
• Kimberly Clark
• Lockheed Martin Corp
• NuStar Energy L.P.
• Paychex Inc.
• Pepsi Co
• Procter & Gamble
• Qualcomm
• Southern Copper Corp
• STMicroelectronics N.V.
• United Parcel Service Inc
• U.S. Bancorp
• Walt Disney
• Wal-Mart
• Wells Fargo

Do you recognize a few of these popular brands? Many of these companies are ones you have been a customer of or have known about your entire life. This is what makes them such desirable and popular choices for investors – they are well known brands, have a strong company background and a long steady history of profits.

Which of these are the Best Blue Chip Dividend Paying Stocks?

It is up to you to research my examples I listed above. As always, I do not advise investors on what stocks to buy. I simply want to point out that there are many blue chip stocks that pay dividends. I urge you to always do your own research on stocks and to never trust anyone who says they have a list of the best blue chip dividend stocks! Nobody can predict the future when it comes to investing. All you can do is arm yourself with as many tools as possible so that you can become a better investor. The greatest tool is your desire to learn and your commitment to learning as much as possible about investing before you decide what investing strategy is best for you.

If you have any questions or comments, please ask in the comments section below!