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Blue chip

A large, established, consistently profitable company with a long operating history and usually a durable dividend.

Blue chip is a descriptive label rather than a defined category. It generally means a large-cap or mega-cap with decades of profits, an investment-grade balance sheet, and a dividend that has been maintained through recessions. Index membership and deep liquidity come with the territory.

The label is not a guarantee. Companies lose blue-chip status when an industry changes, and several former blue chips have cut dividends or filed for chapter-11 within a decade of being described that way.

Example: a company that has paid an uninterrupted dividend for 45 years, carries an A credit rating, and trades 8M shares a day fits the description; the description does not stop the stock falling 40% in a bear market.

Related: large-cap, dividend-aristocrat, defensive-stock, dividend

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