Size doesn’t always matter, but when it comes to blue chip stocks it’s very much a defining characteristic. If you’re not sure whether a stock might be considered blue chip or not, ask yourself a simple question: Have you heard of it? There are probably exceptions, but in most cases the answer will be ‘yes’.
When we talk about blue chip stocks, we’re discussing huge, sector leading companies that most of us are familiar with, whether we take an interest in such things or not. Blue chip stocks invariably belong to companies with a household name.
Why invest in UK blue chip stocks? Read on to find out about the benefits and drawbacks of blue chip investing, how to invest in blue chip stocks, and discover Britain’s 10 best blue chip stocks.
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3 Quick Steps to Buy Blue Chip Stocks in the UK
Here is a quick 3-step guide to purchasing UK blue chip stocks.
Step 1: Open a Trading Account
Open an account with a UK broker that gives you access to blue chip stocks.
Step 2: Deposit Funds
Deposit funds into your account with a debit/credit card, e-wallet, or bank account.
Step 3: Buy Dividend Stocks
Determine which blue chip stocks you want to invest in and confirm your order.
75% of retail investors lose money when trading CFDs with this provider.
Best Blue Chip Stock Brokers in the UK
If you want to invest in any of the blue chip stocks mentioned on this page, start by creating an account with one of our recommended online stock brokers. The following brokers offer a variety of ways to invest in stocks and, most importantly, offer a trustworthy service that we’re happy to vouch for.
1. eToro – Social Stock Broker with 0% Commission
For us, eToro is the best place to buy blue chip stocks in the UK. For starters, this broker offers over 800 global stocks from 17 exchanges, so there are plenty of blue chip stocks to invest in. You can buy stocks in the traditional way, or you can choose to trade stock CFDs with 1:5 leverage.
One of the best things about eToro is that there’s no commission for investing in stocks. The only fee you pay is the spread and a flat $5 withdrawal fee, so its very competitive in terms of pricing. The minimum deposit is $200, and you can make it via bank card, bank transfer or e-wallet like PayPal.
eToro is perhaps best known as a social trading platform that allows you to engage with other trades to discuss strategies and share tips. It’s also famous for its copy trading tools that allow you to copy the entire portfolios of top investors!
Want to buy blue chip stocks on your mobile? If so, check out eToro’s excellent trading app for iOS and Android devices. Finally, eToro is regulated by the FCA, in addition to several other leading bodies, so it’s a very secure and trustworthy broker.
- 0% commission
- Social and copy trading
- Over 800 global stocks
- Buy stocks or trade CFDs
- Limited advanced trading tools
2. Plus500 – Trade Blue Chip Stock CFDs with Tight Spreads
Plus500 is a UK-based platform that is known as one of the best CFD brokers around. This means that while you can’t own stocks in the traditional sense, you can trade a wide range of stock CFDs with leverage of up to 1:5.
Like eToro, Plus500 doesn’t charge any commissions whatsoever, and it also has a reputation for having some of the lowest spreads around. There’s no withdrawal fees either, and a relatively low minimum deposit of £100, which you can make with a variety of payment methods.
Trading on Plus500 takes place on the broker’s own proprietary trading platform, which is available on desktop and as a mobile app. It comes with some useful features, including basic charting and price alerts.
Plus500 is an FCA-regulated broker, so you can be sure it keeps your funds safe. Its parent company is also listed on the London Stock Exchange, so you can trade the best blue chip stocks in confidence on this platform.
- No commission and tight spreads
- User-friendly platform
- Only CFDs
- Limited research and analysis tool
3. Capital.com – CFD Broker with Excellent Educational Resources
This broker is based in the UK and was founded in 2016. Like Plus500, Capital.com operates exclusively in CFDs, and it offers a wide range of different financial instruments, including over 2000 different stocks!
One of the best things about Capital.com is its impressive proprietary trading platform. It’s very user-friendly and comes packed with impressive features, including over 75 indicators and drawing tools.
This broker particularly excels in the educational department, so it’s a good choice for first-time traders. Learning resources available at Capital.com include trading guides, courses and webinars. There’s even Capital.com TV where you can keep up with the latest news!
Capital.com is a commission-free broker, and the spreads and also tight. It also has a very low minimum deposit of just £20, so you don’t have to break the bank to get started. This broker is licensed by the FCA, so you know you’re in safe hands.
- Excellent educational resources
- Fast and fluid trading platform
- CFDs only
- Doesn't accept PayPl
What are Blue Chip Stocks?
The term ‘blue chip’ likely derives from blue poker chips, the highest value chips in the game. This makes sense – you can expect blue chip stocks to be associated with vast companies and giddying market capitalization figures.
What is market capitalization? Simply put, it’s a figure that can be calculated by multiplying a company’s outstanding shares by the current market price of a single share. Usually favoured by investors, it’s an easy formula to work out how valuable a company is according to the stock market. Initially, this figure is set at the point of an IPO (Initial Public Offering).
Then, once a company starts trading, it is determined by the supply and demand of the stock market. This means that a market cap is best understood as the market’s valuation of a company, rather than a measure of that company’s enterprise value.
‘Large caps’ (a category we’d expect blue chip stocks to fall into) are typically valued at over $10 billion while ‘mega-cap’ stocks are valued in excess of $100 billion. The largest companies in the world are now starting to creep into trillion-dollar territory.
‘Blue chip’ denotes more than just market capitalization, however. It is can be understood to convey other, less clearly defined characteristics. Blue chip credentials might also include long-term growth, a proven business model and world-renowned management.
In America, blue chip is often synonymous with the Dow Jones index, which tracks the performance of 30 large cap companies trading on the New York Stock Exchange. Take a look at the Dow 30 and you’ll see a list of companies that pretty much define blue chip, to the extent that they are used to measure the health of the wider US economy. Names like Apple, Coca-Cola, Disney, McDonald’s and Proctor & Gamble should give you an impression of the calibre of company we’re looking at.
Obviously, this doesn’t work as a method to identify blue chip stocks in the UK, but you can expect blue chip British companies to have similar characteristics, as we shall see.
Why Invest in Blue Chip Stocks?
It might be tempting to view investing in blue chip stocks as the epitome of boring, dependable stability. Compared to younger, chancier stocks that will either make early investors a fortune or sink without trace, the blue chip stock represents a safer, less exciting bet.
While blue chip stocks may not attract investors with a get rich quick fixation or day traders looking for volatility, they tend to appeal to wealthy investors who see the value in a well-established stock with long-term earning potential.
It may be too simplistic to roll out the old ‘slow and steady wins the race’ adage but ensuring that your investment portfolio includes a judiciously selected blue chip stock or two should grant a measure of stability and a reliable source of dividend income. If you’re looking to build a diverse portfolio, it’s not a bad idea to offset any riskier stocks with a blue chip investment.
Blue chip companies are, almost by definition, well-capitalized enough to survive a downturn, so a blue chip investment offers stability – however bad things get you can trust that it won’t be wiped out completely.
You can also expect blue chip companies to have a high credit rating, which can be used by investors as an indication of economic health. The moment a company’s credit rating is downgraded to anything approaching ‘junk bond’ status, it can’t really be described as blue chip. Again, stability is implicit whenever a stock is described as blue chip.
In many respects, this is an extension of ‘stability’. However impressively capitalized a company is, it must also be well-established to be described as blue chip. Take, for example, Facebook, which was one of the biggest companies in the world before many deigned to consider it a bona fide blue chip stock. As a company that was founded in 2004 it was simply too young. Again, it’s all about stability – blue chip status should denote long-standing market dominance and a track record of resilient earnings that spans decades.
Dependable dividend returns
In addition to a long history of profits, blue chip investors often look for consistent dividend payments, which can provide a passive income and a solid inflation hedge. So called ‘dividend aristocrats’ are stocks that boast a record of increasing their dividend payment every year for at least 25 years.
Such stocks are popular with conservative investors who value steady dividend returns. Typically, you wouldn’t expect startups and tech companies to pay dividends because such operations often prefer to plough earnings (if they are making a profit) back into the company.
Top 10 Blue Chip Stocks in the UK
Know we’ve given you some background information, let’s take a look at the 10 best bue chip stocks you can invest in today.
Royal Dutch Shell
A blue chip stalwart of the London Stock Exchange, this Dutch-British oil and gas goliath is one of the oil industry’s ‘supermajors’ and the third biggest company in the world based on revenue ($396,556 million). Its dividend has been as dependable as its revenue growth for years, but 2020’s oil crisis and the COVID-19 pandemic have rocked this seemingly bulletproof stock, resulting in a 66% dividend cut, which hasn’t been popular with investors. RDS’s standing as the UK’s undisputed blue chip champion is perhaps wavering but it remains something of a powerhouse.
This UK-headquartered bank with roots in Hong Kong and a strong Asian presence is another well-established FTSE 100 blue chip that has struggled in 2020. Finding itself assailed by choppy political and economic winds thanks to its increasingly awkward position straddling both European and Asian markets, HSBC’s stock has suffered a catastrophic collapse in recent months. The result: its once dependable dividend has been suspended and its blue chip standing looks diminished.
Happily, AstraZeneca is one British blue chip that’s fared pretty well in 2020. In fact, this world-leading pharmaceutical giant has benefitted from its involvement in the development of a possible COVID-19 vaccine. Well-established and in good shape before the race for a vaccine generated headlines and share price surges, AstraZeneca also aims to offer consistent annual dividend growth, making it one of the most popular high dividend blue chip stocks.
Another long-standing LSE blue chip that’s taken a bit of a battering this year, BP faces a dicey future thanks to a whole host of factors including an oil price war and a global pandemic. This once sturdy stock has plummeted in value and its blue chip status is surely imperilled. Too some, BP’s stock may now look like a bargain, but it hardly resembles a sure bet and we wouldn’t be surprised if its dividend is cut.
Another pharmaceutical giant, GlaxoSmithKline has attracted less attention and share price growth than AstraZeneca this year. It also disappointed investors by snipping 17% off its dividend. But GSK’s underlying performance is good and five straight years of revenue growth only serve to strengthen its blue chip credentials.
British American Tobacco
The second biggest tobacco company in the world, BAT has shown some resilience after its stock dipped at the onset of the COVID-19 crisis, bouncing back and outperforming the FTSE 100 with a 4% year over year share price uptick. You might reasonably expect tobacco companies to be on the decline but BAT is faring well thanks to its diversification into ‘reduced risk’ products like vaping. BAT looks like a relatively stable blue chip stock and is one of the most popular UK high dividend blue chip stocks as it can usually be depended on to deliver great dividend returns.
London-based alcoholic beverage giant Diageo has cemented its status among the high dividend blue chip stocks over the years by paying out consistently handsome dividends and rewarding investors with billions in buybacks. At the time of writing the company has pushed back the publication of its annual results, so investors don’t yet know the scale of the company’s COVID-19 hit, or whether the dividend remains intact. Regardless, in less tumultuous times, Diagio is a solid blue chip investment with great brand power and dependable sales.
For a blue chip, Rio Tinto, the Anglo-Australian mining company, has subjected investors to something of a rollercoaster ride in recent months, plummeting at the onset of the Coronavirus crisis in March before recovering 60% over the next couple of months. Then again, such peaks and troughs are hardly unusual in 2020. The underlying health of Rio Tinto should sustain its status as a relatively stable blue chip investment with an encouraging history of dividend growth and strong enough finances to sustain shareholder payouts going forward.
Few companies can match Unilever’s formidable brand power. In fact, listing all of its brands would read too much like a supermarket stocktake to bother, The fact that so many of Unilever’s products are modest everyday consumables should see it continue to perform well through the current economic downturn. Such recession proof stability makes Unilever a solid and dependable blue chip bet right now, which is an appealing factor in such turbulent times, even if Unilever’s healthy stock price doesn’t offer a massive upside and the dividend payments (3% yield) aren’t spectacular.
Another consumer goods behemoth, albeit less well known than Unilever, Reckitt Benckiser is the producer of numerous well-known health, hygiene and home products including Dettol, Disprin, Strepsil, Veet and Gaviscon. RB stock looks to have weathered the COVID-19 storm impressively and it’s hard not to conclude that its brands are particularly well positioned in a post-pandemic market that is likely to value hygiene products. Reckitt Benckiser’s may not be a particularly cheap stock right now, but its consistent performance and dependable dividend growth make it an exemplary blue chip investment.
What are the Risks of Blue Chip Stocks?
‘Risk’ isn’t a word that’s typically associated with UK blue chip stocks. One of the defining qualities of a blue chip stock is stability. Having said that, it’s worth keeping in mind that no stock is entirely risk-free and, as some of Britain’s leading blue chips are currently demonstrating (see Shell, HSBC and BP above), supposedly stable stocks can nosedive if the prevailing economic or geopolitical winds are blowing in the wrong direction.
Nonetheless, while blue chips aren’t immune to such factors, it’s reasonable to assume that they should be less volatile than the majority of stocks. Broadly speaking blue chip stocks are more resilient and better equipped to rebound from a big sell off.
Pros and Cons of Blue Chip Stocks
- Often offer consistent dividend returns
- Diversification – some blue chips straddle multiple sectors
- Strong, experienced management
- Brand power
- Proven business models
- Most blue chips offer great access and liquidity
- Less potential for speedy growth and investor upside than less established stocks
- More high profile and therefore susceptible to negative publicity damaging share price
- Limited short-term movement doesn’t suit a lot of trading strategies
How to Buy Blue Chip Stocks in the UK
Want to buy buy blue-chip stocks from eToro but aren’t sure how to get started? Here’s a step by step guide on how to buy shares in blue chip companies using our recommended stock broker, eToro.
Step one: Search for AstraZeneca (AZN) Stock
Look up AstraZeneca by typing the ticker symbol AZN into the search box. Choose AZN.L for the stock that trades on the London Stock Exchange.
Step 2: Click on trade
Click Trade in the top right corner of the AstraZeneca page.
Step 3: Specify ‘Buy’
If you want to purchase the underlying asset, specify ‘Buy’ on the top tab, change the leverage to X1 and proceed to set your order. To trade AZN CFDs, set your leverage amount, Stop loss and Take profit order limits, then click ‘Set Order’.
Hopefully we’ve demonstrated why UK blue chip stocks might be a good buy for a variety of different investors.
If you’re looking for a stable long-term investment with passive income potential and decent dividend stock returns (and you’re not particularly preoccupied with the idea of making big money as quickly as possible) you’re the ideal blue chip investor. High risk trading isn’t for everyone and slowly reaping the rewards of a long-term, low risk investment sounds like a pretty good plan to us.
If you’re a bit more adventurous, you shouldn’t necessarily disregard blue chip stocks. They may suit more conservative investors but they can also play a part in most investment strategies. Even fearless investors who seek out risky punts with big upsides are wise to build a well-balanced investment portfolio to offset that risk. Blue chip stocks can fulfil that role.
eToro: Buy Blue Chip Stocks with No Commission
- 0% commission on stocks
- Over 800 global stocks
- Buy stocks or trade stock CFDs
- Social and copy trading
- Accepts PayPal
Should I buy blue chip stocks?
If you want to prioritise stability and long-term passive income potential, the best blue chip stocks make a lot of sense. But don't assume that all blue chip stocks are an entirely safe investment. Be sure to research any company you're interested in before pulling the trigger on an investment, and try to factor in broader market conditions to ascertain if the time is right.
Are there other ways to access blue chip stocks?
Beyond simply buying the underlying asset, there are numerous ways to invest in blue chip stocks, including blue chip tracking ETFs like SPY (which tracks the S&P 500). You can also choose to speculate on blue chip price fluctuations with CFDs (contracts for difference) and spread betting, although such methods favour short-term strategies rather than long term investment.
What are the fees when buying blue chip stocks?
Zero-commission stock and ETF trading is available to European clients who trade on eToro. This means that eToro doesn't add a dealing charge or any administrative fees when you buy blue chip stock.
Do all blue chip stocks pay dividends?
While blue chip stocks typically pay shareholders a generous dividend there are plenty of exceptions, including Amazon and Alphabet (Google), who opt not to pay dividends.