By - Kunal Sawhney
- Blue Chip stocks help in averting the risk since they are reputed and financially sound companies
- Investors looking for quality and reliable companies can go for blue-chip stocks since they are less risky due to their dependable earnings
The inclination of investors towards blue chip stocks is quite obvious as these stocks help in averting the risk since they are reputed and financially sound companies. This is the reason the blue-chip stocks are considered safe investment options.
Other factors that draw investors’ interest towards the blue-chip stocks are they are typically dividend-paying stocks, can cope up with economic downturns and are not highly volatile. Such stocks also demonstrate slow but moderate growth potential.
Investors looking for quality and reliable companies can go for blue-chip stocks since they are less risky due to their dependable earnings and tend to be quite appealing and highly suited for conservative investors.
Market downturns such as a recession resulted into huge decrease in revenue, wrecking the weaker companies. However, the extraordinary feature of blue-chip stocks allows them to remain strong even during the worst of times.
How to invest in blue-chip stocks?
In order to invest in blue-chip companies, an investor needs to first evaluate the recent annual and quarterly published reports to get a glimpse of their performance. After evaluation, one should analyse the historical performance of the company to know the dividend payments trend. Past performance will give a more precise indication of a company’s performance.
The investor can easily purchase stocks individually or can invest in mutual funds or ETFs. If we talk about the UK stock market, blue chip stocks form part of the benchmark index of the London Stock Exchange, FTSE 100. The index constitutes the 101 largest public listed firms.
In this article, we have discussed some of the trending blue chip stocks:
AstraZeneca PLC (LON: AZN)
The British-Swedish healthcare stock has been making news for the development of its Covid-19 vaccine, AZD1222, which has been approved for use by various nations, including the European Union, United Kingdom, Argentina, Mexico, Dominican Republic.
The pharma major recently published its full year earnings for the FY 2020, recording a 9 per cent increase in total revenue to $26,617 million on an actual basis. The revenue growth was driven by the surge in product sales by 10%, improvement in total revenue of new medicines by 33% and growth in emerging markets by 53%.
The pharma major intends to continue focusing on improving its operating leverage. The company expects the total revenue to increase by a low-teens percentage along with faster growth in Core EPS to US $4.75 to US $5.00.
AstraZeneca’s shares have yielded a dividend of 2.98 per cent in the previous twelve months.
BP PLC (LON: BP.)
The well-placed British oil and gas major aims to reduce carbon emission by 2050. The company has recently come up with its Q4 and full year results for the financial year 2020. BP reported a loss of $5.7 billion in the full year (2019: $10 billion profit) because of the decrease in oil and gas prices, drop in demand and certain exploration write-offs. However, for Q4 2020, the Group reported a profit of $1.4 billion (Q3 2020: $0.5 billion loss).
The company also provided an operational update that it has begun with the production process of three new upstream projects -- Ghazeer in Oman, KG D6 R-cluster in India, and Vorlich in the UK. Despite the full-year loss, BP paid a dividend of 5.25 cents per share to its shareholders in the fourth quarter.
The company forecasts a recovery in demand for oil in 2021, since there has been an increase in the oil prices from the end of October because of Covid-19 vaccine rollout programmes and continued active supply management by OPEC+ countries.
BP’s shares have yielded a dividend of 7.24 per cent in the previous twelve months.
BT Group PLC (LON: BT.A)
The well-known London-based telecommunication company had contributed £24 billion to the UK economy in the previous fiscal year.
The company reported revenue of £16,058 million, adjusted EBITDA of £5,603 million, and profit before tax of £1,591 million for the nine months period ended on 31 December 2020. It has also announced the formation of Digital, a new technology unit that will guide the digital innovation agenda of the company from 1 April 2021 and updated about the sale of some of its business units in Italy.
The company has provided a revised normalised free cash flow outlook in the range of £1.3 billion to £1.5 billion, while the EBITDA range is expected to be between £7.3 billion to £7.5 billion.
BT Group shares have yielded a dividend of 12.5 per cent in the previous twelve months.