Classing a company as being blue chip should not be undertaken lightly as the label brings with it certain responsibilities and attributes.
Those responsibilities include that the company has a fortress-like balance sheet and the ability to withstand all sorts of headwinds. Arguably the major banks all failed this test during the global financial crisis (GFC), as they required support from the Federal Government to prop up their funding lines which all of a sudden dried up.
Attributes include an ability to grow earnings and dividends at a reasonably steady rate year in and year out. This is far from an easy hurdle to meet – few companies are able to produce that level of dependability and consistency.
The following three stocks arguably meet these requirements for "blue chip" status and importantly when viewed over a long-term holding period should provide reasonable returns to shareholders if purchased at current prices.
CSL Limited (ASX: CSL) – has a super strong balance sheet, an impressive global growth profile and a long track record of growing earnings and dividends. In fact the interim dividend paid today is around 50% more than the full year dividend paid 10 years ago!
Brambles Limited (ASX: BXB) – owns an impressive group of assets which gives the firm a major scale advantage and in turn a significant comparative advantage. This should allow Brambles to continue to grow earnings and dividends at above average rates for many years to come.
Origin Energy Limited (ASX: ORG) – is the owner and provider of critical energy assets and services. Origin's strategic domestic position is unlikely to diminish any time soon and so far has allowed the firm to boost its dividend from 13 cents per share (cps) a decade ago to 50 cps today. With earnings forecast to undergo a step change as its LNG Projects enter production, the outlook for dividend growth is strong too.
