What is Blue Chip Stocks?

As in previous article, one of the subdivision in stock investment is Blue Chip Stock. What is actually Blue Chip Stock?


Here are some definition of the term, compiled from few resources can be found in the net.


Wikipedia defines Blue Chip Stock as:

A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. Blue chip stocks pay regular dividends, even when business is faring worse than usual. The term is derived from casinos, where blue chips represent the greatest value among the many colors of chips.
The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at USD$200 or USD$250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he intended to return to the office to "write about these blue chip stocks." Thus the phrase was born. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks.[1] In contemporary media, Blue Chips and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.

Investopedia refered Blue Chip as:

Stock of a well-established and financially sound company that has demonstrated its ability to pay dividends in both good and bad times. These stocks are usually less risky than other stocks. The stock price of a blue chip usually closely follows the S&P 500.

While About.com mentioned Blue Chip Stock as:

A "blue chip" is the nickname for a stock that is thought to be safe, in excellent financial shape and firmly entrenched as a leader in its field. Blue chips generally pay dividends and are favorably regarded by investors. A few examples of blue chips are Wal-Mart, Coca-Cola, Gillette, Berkshire Hathaway and Exxon-Mobile.
Blue chip stocks are sometimes referred to as bellwether issues.