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Describing a business as “blue chip” comes from the game of poker, where blue chips are the most valuable.

A blue chip corporation is large and stable, and is a leading company in its business segment. Most are recognized nationally, or even internationally, and they produce well-known products or services.

Blue chip companies generally have a market value in the billions of dollars. Their stock usually performs similarly to the stock market as a whole, as measured by the S&P 500 index.

Investors typically buy blue chip stocks in order to have investments that offer slow but steady growth in their portfolio. Blue chips are usually considered safer than lesser-known companies, although this is not always true.

Although it is not required, it is common for a blue chip stock to pay dividends. Companies that pay dividends are generally a mature, reliable business. They are giving some profits to shareholders because the profits are steady and reliable.

The leading stock indexes in large western countries are comprised of blue chip stocks. For example, the Dow Jones Industrial Average is an index of 30 blue-chip stocks that are among the leaders in their industry, including General Electric, Boeing, American Express, AT&T, Caterpillar, Home Depot, IBM, McDonalds, Coca-Cola, Proctor & Gamble and Chevron.

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