Best Blue chip stocks to invest in 2024: Reviewed by Digimagg
Explore top Blue chip stocks for 2024: solid investment opportunities with proven track records and stable performance for long-term growth.
What is a Blue chip stock?
A blue chip stock represents ownership in a sizable, firmly established, and financially secure corporation. Typically, these are large-cap stocks, valued at $10 billion or more, with a lengthy track record of profitability.
Most blue chip stocks distribute regular dividends and demonstrate a pattern of consistent dividend hikes. Despite often appearing costly, they are commonly regarded as secure investment options.
Reviewing our selection of 5 blue chip stocks, nearly all of them have surpassed the total return of the S&P 500 Index since the year 2000.
Investors favor blue chip stocks for their resilience in all market conditions. Typically large, established companies with reliable business models, robust finances, and steady cash flows, they prioritize stability over rapid growth. These stocks often rebound quickly from economic downturns, if affected at all.
Our guide highlights 5 blue chip stocks renowned for their consistent revenue and earnings growth, reliable cash flows, and history of dividend increases. Dive in to explore our top picks for the best blue chip stocks.
Best Blue chip stocks for investment in 2024
Presenting the best 5 blue chip stocks worth considering for your investment portfolio:
1. ASML Holdings: This Dutch semiconductor equipment manufacturer specializes in extreme ultraviolet (EUV) lithography systems, which are crucial for chipmakers.
2. Microsoft: Renowned for its office software and cloud computing services, this U.S. tech giant has surged to become the world's most valuable company, largely due to its leadership in artificial intelligence (AI).
3. Caterpillar: As the largest producer of construction equipment globally, Caterpillar achieved record sales of $67.1 billion in 2023. It plans significant investments of $2 billion to $2.5 billion in 2024, primarily focused on new technologies.
4. UnitedHealth Group: The world's largest insurer continues its growth trajectory, capitalizing on the increasing demand for health insurance, healthcare, and health technology services driven by an aging population.
5. American Express: This U.S.-based company generates revenue from its credit card offerings and travel services. Bolstered by its affluent customer base, it achieved record revenue in 2023.
Examining in depth the best Blue chip stocks for investment
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Established four decades ago through a merger between Philips and ASM International, this Dutch firm holds a monopoly on EUV lithography machines, pivotal for imprinting patterns on silicon chips. These machines are intricate, comprising over 100,000 components from specialized companies, posing a significant barrier for potential competitors to challenge this monopoly. These machines utilize ultraviolet light to produce cutting-edge chips. ASML, situated in the Netherlands, capitalizes on two major trends: the Biden administration's drive to reduce reliance on Chinese chip manufacturers and the increasing adoption of AI technologies, which necessitate the type of chips ASML's machines facilitate.
The latest model, the High-NA Twinscan EXE lithography machine, commands a price tag of approximately $380 million each. In the previous year, ASML recorded sales of 421 new machines and 28 used ones. Sales surged by 31% in 2023 to €27.6 billion ($29.9 billion), with earnings per share (EPS) climbing by 40.8% to €19.19. ASML distributed dividends totaling €6.10 last year, including interim dividends, marking a 5.2% increase from 2022. Additionally, ASML announced plans to repurchase up to €2 billion worth of its own shares by the end of 2025.
Advanced lithography machines Monopoly in EUV Collaborations Supply chain position High barriers to entry.png)
Component shortages Customer concentration
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Microsoft, recognized for its productivity suite including Word, Office, and Windows, possesses LinkedIn, Skype, and video game company Activision Blizzard. The company's Intelligent Cloud division contributes significantly to its robust performance, while its involvement in AI, exemplified by its investment in OpenAI, the developer of ChatGPT, is yielding positive results. In the second quarter of fiscal 2024, Microsoft disclosed a revenue of $62 billion, marking an 18% increase compared to the previous year, with earnings per share (EPS) standing at $2.93, up by 33% from the corresponding period. Notably, Microsoft Cloud revenue surged by 24% year over year.
While Microsoft's quarterly dividend yield may not be exceptionally high, it exhibits consistent growth. The company raised its dividend by 10.3% this year to $0.75, marking the sixth consecutive year of increases by 9.5% or more. Over the past decade, Microsoft has elevated its dividend by an impressive 168%.
Software dominance Hardware presence Comprehensive solutions Revenue and profitability Investment in innovation Compliance costs Cloud competitors
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Caterpillar conducts operations across all seven continents through its three primary segments: Construction Industries, Resource Industries, and Energy & Transportation. Additionally, it operates a Financial Products segment, offering financing and related services. The company is coming off a financially unprecedented year, and if benchmark interest rates decline later this year, it could further stimulate sales. With reduced borrowing costs, expenditure in construction and mining is anticipated to escalate, resulting in heightened demand for Caterpillar's machinery. In 2023, Caterpillar recorded revenue of $67.1 billion, reflecting a 13% increase, and earnings per share (EPS) of $21.21, marking a substantial 53.5% rise from the previous year.
Throughout 2023, Caterpillar executed stock repurchases totaling $5 billion and disbursed $2.6 billion in dividends. Maintaining its track record, Caterpillar has elevated its quarterly dividend for 30 consecutive years, including an 8.3% increase in 2023 to $1.30 per share. Trading at under 19 times earnings, it stands as the most undervalued blue chip company on this roster.
Brand recognition Global market share Innovation in equipment Revenue and profitability Commodity price fluctuations Manufacturing expenses Intense market rivalry
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UnitedHealth Group holds the distinction of being both the largest insurer and the biggest healthcare entity globally. Its primary challenge doesn't stem from competitors, but rather from regulatory scrutiny due to the vast scale and complexity of its operations. As the predominant U.S. health insurer, pharmacy benefits manager, and proprietor of doctor groups, UnitedHealth Group is currently under investigation by the U.S. Justice Department for potential antitrust violations. The company operates through two key segments: UnitedHealthcare, its insurance unit providing health coverage for employers, Medicare, and Medicaid, and Optum, its health-services division owning surgery centers, physician groups, and serving as a major pharmacy benefits manager.
In 2023, the company witnessed a 14% increase in both revenue and EPS, reaching $60.5 billion and $11.21, respectively. American Express anticipates revenue growth between 9% and 11% for the current year, with projected EPS ranging between $12.65 and $13.15, representing a 15% increase at the midpoint. With the addition of 12.2 million cards, its global cardholder base now exceeds 140 million. Over the past two decades, the company has raised its dividend by 900%. This year, it approved a 17% hike, raising it to $0.70 per share.
Strong brand recognition UnitedHealthcare and optum Digital health initiatives Extensive network Pharmaceutical prices Customer complaints Medicare and medicaid dependence
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From its origins in 1850 as a cargo delivery service, the company has evolved significantly. Presently, it offers a range of services spanning from tourism to the issuance and management of credit cards and traveler's checks. In a move to expand its presence in the travel sector, the company's Global Business Travel segment is in the midst of acquiring travel competitor CWT for $570 million. This acquisition would add 4,000 customers from CWT to American Express's business travel segment, resulting in a projected 45% increase in transaction volume, as stated by Amex GBT CEO Paul Abbott on March 25th. Its travel sector proves highly profitable. Although its market capitalization is smaller compared to credit card giants Visa (NYSE: V) and MasterCard (NYSE: MA), its annual revenue surpasses that of either competitor by more than double.
In 2023, UnitedHealth reported revenue totaling $371.6 billion, marking a 15% rise from the previous year, with earnings per share (EPS) reaching $23.86, reflecting a 12.6% year-on-year increase. While UnitedHealthcare constitutes the larger segment, Optum is experiencing faster growth. In 2023, UnitedHealthcare generated revenue of $281.4 billion, up by 12.7%, while Optum's revenue surged by 24% to $43.9 billion. UnitedHealth Group boosted its quarterly dividend by 13.9% in 2023 to $1.88, marking the 14th consecutive year of dividend increases.
Prestige and trust Travel and lifestyle benefits Revenue and profitability Intense competition Legal risks Seasonal variability
Why opt for Blue chip investments?
Enhanced safety
Blue chip stocks boast stable earnings and possess strategic advantages that foster resilience across economic fluctuations. While not immune to recessions, they typically outperform other stocks during economic downturns.
For instance, Johnson & Johnson weathered the Great Recession more effectively than the average stock. Amid the 2008 financial crisis, while the S&P 500 plummeted by 54%, Johnson & Johnson only experienced a 21% decline.
Consistent dividend payments
Many blue chip stocks boast a lengthy track record of dividend payments, supported by robust free cash flow that facilitates regular dividend hikes and share buybacks.
It's important to note that being a blue chip doesn't always translate to high dividend yields. However, among the mentioned stocks, all pay quarterly dividends, with Coca-Cola, Johnson & Johnson, LVMH, and UnitedHealth Group exceeding the S&P 500 average yield of 1.47%.
Suitability for diverse investors
The potential for stable growth and income renders blue chip stocks suitable for a wide range of investors, whether they're saving for future education expenses, retirement, or other long-term objectives.
While they may not exhibit explosive growth due to their size, blue chip stocks typically demonstrate steady appreciation, with downturns not as pronounced as those of less stable, smaller-cap stocks.
Where to obtain recommendations and insights on Blue chip stocks?
Investing in blue-chip stocks offers a straightforward investment approach as these companies are widely recognized, with ample information available about them. To explore further insights on blue chip stock selections, we suggest consulting AltIndex.
AltIndex operates on a subscription basis, employing alternative data and artificial intelligence (AI) to assess stocks. It continuously updates its data throughout the day, incorporating various metrics such as web searches, customer satisfaction ratings, social media activity, and app downloads to analyze companies. Its curated lists of top-performing stocks refresh every thirty minutes, accompanied by real-time updates on share prices. Utilizing an AI score derived from multiple datasets, AltIndex identifies stocks likely to experience significant movements and identifies the driving factors behind these shifts. Stocks are assigned scores ranging from 1 to 100, facilitating simplified decision-making for investors.
With over 10,000 members, AltIndex delivers over 100,000 stock insights and alerts daily, boasting a robust success rate of 75% with its AI-generated stock selections.
Interested individuals can opt for AltIndex's Starter Plan, available for just $29 per month, offering stock picks delivered directly to their email inbox along with numerous other beneficial features.
In conclusion, although blue chip stocks are not entirely immune to market downturns, they are generally perceived as safer investment options compared to newer or smaller companies. However, this safety comes at the cost of potentially slower growth compared to other stocks. Nonetheless, their growth is typically more dependable, and their dividends can serve as a reliable source of income for investors.
The best blue chip companies often possess a competitive edge in technology, brand recognition, size, or a combination of these factors. Blue chip stocks are instrumental in bolstering the stability of a stock investment portfolio.
