Which type of common stock is characterized by major companies with strong earnings records?

Blue chip stocks are known for being shares in large, established, and financially sound companies that have a solid track record of performance and stability. These companies typically demonstrate consistent profitability, reliability, and the ability to generate dividends, making them a preferred choice for conservative investors seeking less volatility.

The term "blue chip" originates from poker, where blue chips have the highest value. Investors often look to blue chip stocks for long-term investment options due to their strong earnings records and the fact that they are often leaders within their respective industries. Their stability during market fluctuations contrasts with other types of stocks, which may carry higher risks and potential returns but lack the reliability associated with blue chip stocks.

The distinguishing characteristics of blue chip stocks reinforce their reputation as a safer investment, especially attractive to risk-averse investors or those prioritizing income through dividends.