In the world of finance, there are many different strategies for investing. Some people might prefer to buy stocks in growth companies that have potentially higher returns but also carry higher downside risks.
The idea of stability and growth is an important one, too. That's why some investors prefer companies with predictable earnings and pay dividends.
Blue-chip stocks would be the most practical for investors seeking stability. Blue Chip companies usually have a proven track record and tend to be safer bets regardless of market movements.
By definition, Blue chip stocks are companies with a reputation for being reliable and trustworthy. Moreover, they generally pay dividends to shareholders, which means you can earn some money while your investment grows.
This guide explores the fundamentals that make a stock a blue-chip. We will also analyze 10 of the best blue-chip stocks in the UK that you might find interesting.
Five Steps To Invest In Blue Chip Stocks UK At 0% Commission
Below is a step-by-step guide on how to start investing in the best blue-chip stocks in the UK.
- Choose a commission-free broker to cut on your total cost of investing.
- Deposit money into your brokerage account.
- Select the blue-chip shares you want to invest in.
- Confirm the shares, then press 'Open Trade', and you will have bought your favourite blue-chip stock at zero commission.
For more information on opening a brokerage account, there are more details in later sections of this guide.
Best Blue Chip Stocks UK To Invest In 2023:
- AstraZeneca (AZN)
- GlaxoSmithKline (GSK)
- Unilever (ULVR)
- Reckitt Benckiser (RKT)
- BP (BP)
- Royal Dutch Shell (RDSB)
- HSBC Holding (HSBA)
- Diageo (DEO)
- Rio Tinto (RIO)
- British American Tobacco (BATS)
Below is a more comprehensive analysis of some of the most promising blue-chip stocks UK to buy in 2023.
Best Blue Chip Stocks UK To Invest In 2023
1. AstraZeneca (AZN)
AstraZeneca PLC is a British-Dutch pharmaceutical company that manufactures and sells prescription medications worldwide. AstraZeneca's profile rose significantly in 2020 after it launched the first successful COVID-19 vaccine.
Besides the COVID-19 vaccine, AstraZeneca is continuously investing in research and development to come up with medications for different ailments. AstraZeneca also continually collaborates with other companies, while making strategic acquisitions towards the same ends.
For instance, AstraZeneca recently announced the acquisition of Alexion, and it's a big deal. That's because Alexion has an existing deal with Swiss biotech company Neurimmune AG. The deal involves in-licensing rights to develop, produce and distribute NI006, a new human monoclonal antibody. NI006 is being tested to treat transthyretin amyloid cardiomyopathy (ATTR-CM), a condition known to cause heart failure.
With such investments in research, it is not surprising that AstraZeneca is a consistent dividend payer. In fact, AstraZeneca has a progressive dividend policy, which means it expects to keep paying higher dividends each subsequent year.
Such stability in dividends means that AstraZeneca investors can expect capital growth regardless of short-term market conditions. For this reason, AstraZeneca stands out among the best blue-chip UK stocks to invest in 2023.
2. GlaxoSmithKline (GSK)
Like AstraZeneca, GlaxoSmithKline is a UK pharmaceuticals giant that has a global reach and recognition. Due to its deep pockets and advanced research capabilities, GSK has a high-value pharmaceutical product line that pretty much guarantees sustainable revenues every year. By default, this earns it a place among the best blue-chip UK stocks to invest in 2023.
The best thing about GSK is that it is continually investing for growth. It does this through in-house R&D as well as acquisitions of strategic companies that can help drive growth. For instance, in late 2021, GlaxoSmithKline announced that it had received FDA authorization for its HIV vaccine. The drug named Apretude is approved for adults and adolescents who weigh over 35 kg and are at risk of getting HIV through sex.
GlaxoSmithKline is also getting more active in the fight against COVID-19. GlaxoSmithKline is the one behind a Covid-19 monoclonal antibody therapy called Sotrovimab. The product is a success and GSK is already shipping it internationally. The latest to order is Canada, which GSK said ordered 20k doses in January 2020, after making an order of 10,000 doses back in October 2021.
With such continuous developments, GSK revenues are likely to keep going up with each subsequent year.
Due to its revenue stability, GSK is able to pay dividends consistently. This coupled with revenue stability makes GSK one of the best blue-chip UK stocks to buy in 2023. It may fluctuate short term, but like other UK blue chips, it is likely to hold its value better than other stocks.
3. Unilever (ULVR)
Unilever cannot miss when looking into the best blue-chip stocks UK to invest in 2023. Unilever is a global reach in the fast-moving consumer goods market. This means it is pretty much guaranteed to record strong sales annually and is relatively unaffected by the economic conditions of any single country.
Besides, Unilever's product range is so wide that at any one time, any or a variety of its products are in demand. For instance, at the heat of the pandemic, Unilever's cleaning products, and comfort foods recorded strong sales in 2020 due to the lockdowns. So much so, that Unilever for a brief moment, became the most valuable company in the FTSE 100.
However, the most important aspect that makes Unilever a top UK blue-chip stock to buy in 2023 is its ability to control prices. Due to its global presence and strong brand name, Unilever can easily raise prices in response to market conditions without taking a hit on its market share.
For instance, in late 2021, Unilever announced that it would be adjusting prices upwards in response to rising inflation risks in the U.K. This was a continuation of the price hikes that it had already implemented earlier in the year. Interestingly this did not affect its revenues and its profits for 2021 beat analysts' estimates.
When you factor in all the above and the fact that Unilever is a consistent dividend payer, it is not hard to see why it makes it to the list of top UK blue-chip stocks to invest in 2023.
4. Reckitt Benckiser (RKT)
Reckitt Benckiser Group is a London-based multinational company that manufactures and distributes health & hygiene, among other consumer products in the UK, and globally.
Like Unilever, Reckitt Benckiser sells its products globally, which means it is cushioned from any adverse economic events in a single country. It is also noteworthy that Reckitt Benckiser deals in basic hygiene products. These are products that households have to buy, regardless of the outlook in the broader economy.
This stability in earnings means that investors can expect consistent dividends. That's a plus for investors seeking consistent gains and makes it one of the best blue-chip UK stocks to invest in 2023.
5. BP (BP)
BP is one of the largest energy companies on the planet. BP is also one of the most profitable oil firms globally, engaging with gas, low carbon energy production, among other aspects of the energy industry.
Since the energy market is pretty much ever in demand, it is not surprising that a major industry player like BP makes it to the list of the best blue-chip stocks UK to invest in 2023.
Besides being one of the largest energy majors, BP is also continually investing in growing its market share and revenues. For instance, in late 2021, BP announced a major acquisition in Norway.
In a move to create the largest listed E&P Company focused on Norwegian Continental Shelf, BP Norwegian joint venture, Aker BP, announced that they were acquiring Lundin Energy's oil & gas business. This is a big deal in terms of growing BP's market share and by extension its revenues.
Thanks to its strong position in the global energy industry, BP consistently rewards its investors with dividends. It is one of the most consistent dividend payers in the UK, which guarantees investors capital growth, short-term market movements notwithstanding.
For such prospects of growth and stability, BP is a common-sense UK blue-chip stock to include in a 2023 stock portfolio.
6. Royal Dutch Shell (RDSB)
Royal Dutch Shell is a well-known global energy and petrochemical giant. The Royal Dutch Shell plc operates through various units such as Integrated Gas, Products Chemicals, and Upstream Oil worldwide.
Energy is at the core of every industry, and the fact that Royal Dutch Shell is one of the world's largest energy companies means that it reaps most of the industry benefits. By extension, this means it has consistent revenues and can comfortably pay dividends every year. In fact, Royal Dutch Shell aims to grow dividends by at least 4% every year.
Besides drawing consistent long-term income from its oil and gas investments, Royal Dutch Shell is also pivoting into other growth sectors as the world shifts away from carbon. The company is also selling some of its oil and gas businesses and returning the money to investors. This means investors can expect higher dividends in the short to medium term.
With all these factors at play, it is not hard to see why Royal Dutch Shell is one of the best blue-chip UK stocks to invest in 2023.
Check Out: 10 Best Growth Stocks To Buy For 2023
7. HSBC Holding (HSBA)
Banks can't miss in a list of blue-chip UK stocks to buy at any given time. That's because they operate in one of the more stable industries that supports pretty much all other industries. HSBC, being one of the largest banks in the UK, stands out as a top UK blue-chip stock to buy in 2023.
Besides operating in one of the most stable industries out there, there is a lot to love about HSBC. For instance, HSBC has been expanding into Asia's private banking market, which is one of the fastest-growing globally.
One of its moves into the Asian wealth management market involves a strategic acquisition. In December 2021, HSBC announced that it had acquired India's L&T Finance's wealth management business in a deal worth $425 million.
In a strategy led by Group CEO Noel Quinn, HSBC is looking to build up its wealth business in Asia. The bank has committed $3.5 billion towards growing its personal banking arm and becoming Asia's largest wealth management firm by 2025.
Besides the potential for growth in the Asian wealth management business, HSBC is also rebuilding its relationships in China. Towards the end of December 2021, HSBC announced that it had got regulatory approval in China to take full ownership of its life insurance joint venture. This is part of its strategy to expand its non-core banking services in China. Given that China is one of the largest financial markets in the world, this is a factor that is likely to drive HSBC's stock value growth in 2023 and beyond.
With banks set to be favoured by rising interest rates in 2023, HSBC's value is likely to go up in 2023. Factor in the fact that HSBC is a dividend-paying stock, and it is not hard to see why HSBC is among the best blue-chip UK stocks to invest in 2023.
8. Diageo (DEO)
Diageo is one of the world's largest alcoholic beverage companies, producing and selling Scotch whisky and vodka products. The company also offers beer in different varieties, among other alcoholic drinks.
Being one of the most dominant alcoholic beverages companies globally, its sales are always stable all year round. By extension, Diageo stock is stable, and one of the best blue-chip UK stocks to invest in 2023. Analysts are aware of this too, and based on the most recent consensus rating, Diageo has a rating of 1.7. This means it is a strong buy.
Aside from its strong analyst predictions, multiple other factors make Diageo a top UK blue-chip stock to buy in 2023. The biggest of these factors is that consumer demand is on a growth path in the US and all its major markets.
Data indicates that Diageo achieved strong results in fiscal 2021, with sales growing organically by 16% over the course of last year. This was driven by gains across all regions and an improvement on their largest market - North America. With the world economy, especially in North America, on a growth trajectory, Diageo sales could get stronger not just in 2023, but for many years to come. That's a plus, in terms of Diageo's stock price potential.
It is also noteworthy that Diageo is a consistent dividend payer, a key metric when evaluating blue-chip stocks. Diageo pays dividends twice a year and is one of the most consistent dividend payers in the FTSE 100.
Such dividend consistency and a strong market position make Diageo one of the best UK blue chips to add to a stocks portfolio.
9. Rio Tinto (RIO)
Rio Tinto is one of the world's largest mining companies with operations in over 35 countries. They offer a range of minerals, including aluminium, copper ore, and borates.
Considering that it is one of the larger producers of in-demand minerals that are used in growth industries such as electric cars, Rio Tinto is easily one of the safest and most stable UK stocks in the FTSE 100.
Besides its strong position in the minerals market, Rio Tinto is keeping up with the trends, which is key to long-term value growth. At the moment, there is a push towards decarbonization, and mining companies stand the risk of being viewed as planet polluters.
Rio Tinto is cognizant of this fact and has put in place measures to cut down on carbon emissions. Rio Tinto has just announced that they will acquire four battery-electric trains. The trains will be incorporated into the company's iron ore mining operations in the Pilbara region of Western Australia. The electric trains are part of an initiative by Rio Tinto to cut carbon emissions by 50% before 2030.
Rio Tinto is also making strategic investments that could help drive value growth for many years to come. In late 2021, Rio Tinto announced that it had acquired an Argentine Lithium mine for $825 million. This is part of its push into battery materials, a market that is on an exponential growth path due to the global shift towards electric cars.
When you combine these fundamentals with the fact that Rio Tinto is a dividend-paying stock, it's easy to see why it is one of the best blue chip stocks UK to invest in, in 2023.
10. British American Tobacco (BATS)
British American Tobacco is one of the largest Tobacco companies in the world. BATS also has many other Tobacco-related products such as vapors, and modern oral hygiene products like Swedish-style snus.
As an investment, BATS stands out as one of the very best blue-chip UK stocks in 2023. That's because it is one of the highest dividend-paying stocks in the UK It is also very consistent and pays dividends pretty much every year. This means it offers a mixture of value growth and stability, two of the key things that investors look for in blue-chip stocks.
The best part is that there are growth avenues for BAT going into the future. One of the biggest ones is the US vaping market. In October 2021, the FDA approved the marketing of vaping products, and BATS was one of the big beneficiaries. That's because its vaping product Vuse was the first to be approved.
At the time, the FDA stated that it had analyzed BAT's Vuse data, and found that it greatly reduced exposure to the chemicals found in conventional cigarettes. From an investor perspective, this means higher revenues, better stock performance, and higher dividends in 2023 and beyond. That's a good enough reason to include BAT in a portfolio of the best UK blue-chip stocks to invest in 2023.
Analysts have a pretty good outlook for BATS too, an indicator that they believe in its future as an investment. The average analyst consensus rating for BAT is 1.8. Essentially, this means they believe BAT is a strong buy. When you consider its market dominance and growth potential, it is hard to doubt them.
The Basics Of Blue Chip Stocks UK
While risky companies are ideal for ambitious investors, blue-chip stocks provide a safer haven in times when the market is unstable.
There are multiple definitions of a blue-chip. However, the bottom line is that they share some characteristics, some of which are as below:
- They are usually market leaders in their industries.
- They have been around for a long time (decades in most cases).
- Their earnings are consistent and predictable.
- They are high market cap companies.
- Their debt levels are usually low, or at manageable levels.
- They are consistent dividend payers.
- They have a history of surviving multiple bear markets.
Essentially, investing in LSE blue-chip stocks is owning shares in some of the UK's most trustworthy and reliable companies.
That's not to say that blue-chip stocks cannot drop in value. If a company loses its edge in the market and its market cap drops, it ceases to be a blue-chip stock.
The bottom-line when it comes to blue chips is that they are long-term investments. Most people who buy them tend to hold them for decades.
Difference Between Blue Chip Stocks and Large Cap Stocks
The difference between blue-chip stocks and large-cap companies isn't always clear. The most notable distinction is that the former tend to be less volatile than their peers, meaning they'll experience less change in value over time. This makes them a better option if you want your money to grow steadily without the risk of losing it all overnight.
Many companies achieve large-cap status (£10 billion market cap) but lose it over time. For instance, during the dot com era, tech companies achieved large-cap status, but due to changes in the market, they lost their status. Airlines too, like British Airways, are large-cap but have been highly volatile over the last two decades. By contrast, blue chips have maintained their value in the same period.
Why Should you Invest in Best Blue Chip Stocks UK?
The importance of building a diversified portfolio is not something that any investor can deny. A well-rounded investment strategy will help you maintain your wealth and protect it from drastic changes in market direction.
That's why it makes sense to include blue chips in your portfolio, even as you seek exponential portfolio growth through new stocks.
That said, here are some of the factors that make UK blue chips the best investments to consider in 2023.
They have strong balance sheets.
In order to see how well a company is doing financially, you have to look at its balance sheet. The numbers on the balance sheet outline whether or not there will be enough money coming in for all operations and assets needed against debts owed.
The best blue-chip stocks have multiple assets that generate a steady and predictable income. This allows such companies to navigate tough market conditions and grow.
They have successful business models
With a long history of success, blue-chip stocks are well-known and reliable investments. They've been successful in their respective markets for years so you know they'll continue to be profitable in the future too.
For instance, BP has been around for over 100-years, and due to its dominance in the energy sector, it continues to be successful.
In contrast, a tech company like Uber may have a similarly high market cap as BP, but it's not a blue-chip. That's because its revenues are inconsistent, and it is not a dividend-paying stock.
Blue Chips recover well from recessions.
Market downturns are a part of the market. However, in recessions, blue chips recover better because their core business model is strong. They also tend to become more attractive in such times, as investors see it as an opportunity to invest in a high-value stock on the cheap.
They are an opportunity to earn passive income from dividends
One of the best things about investing in blue-chip stocks is that they pay dividends. It's no surprise, as these companies tend to be strong and stable with a competitive advantage in their respective markets.
In essence, by investing in blue chips, you have the opportunity to earn a regular and predictable passive income on top of the speculative aspect of the stock.
What Are Blue Chip Stock ETFs?
One of the best ways to make your blue-chip stock investment even more profitable is by picking an ETF over individual companies. This will allow you access to all those high flyers and lower-ranked stocks in which there's still potential for growth.
If you invest in an ETF that tracks the FTSE 100 index, your investment will be diversified by including many blue-chip companies. Not all of them might meet this criterion, but most would, and it's worth considering when choosing which ones to include or not. One such ETF is the FTSE 100 UCITS ETF offered by Vanguard.
Who Should Invest In Best Blue Chip Stocks UK?
Investors come to the market with different financial goals, but they can all benefit from investing in blue-chip stocks. These companies have consistent profitability, and they pay dividends. That's a plus for long-term wealth creation.
Blue-chip companies are usually more stable and less risky, making them the ideal investment when markets are volatile. Even if a recession happens or there's an economic slowdown for some other reason, these firms will still be able to provide dependable earnings.
It pays to incorporate blue chips in a stocks trading strategy even for investors seeking quick growth. You significantly lower the risk of loss.
Risks Of Investing In Best Blue Chip Stocks UK
Just because blue chips are low risk does not mean they don't carry any risks. No stock is immune to the risk of loss, no matter how fundamentally strong it is.
An airline company like British Airways was once considered a blue-chip. However, due to market factors, it never got back after the crash of 2008. That's why it is always advisable to diversify, even when investing in blue-chip stocks.
Which Blue Chip Stocks Should You Invest in?
Earlier in the article, we listed the 10 best blue-chip stocks UK to invest in 2023. While they are all awesome stocks, it is always best to do your own research before investing in any of them.
Take your time and get an idea of the various terms used in finance, and how they apply to investing.
The list of blue-chip stocks discussed in this article would be a great place to start your search. You might be more drawn towards one industry or have companies in mind that you prefer. Whatever the case, make sure to spend time on both fundamental and technical analysis.
Once you are comfortable with your stock choice, log into the trading platform and buy.
How To Invest In Best Blue Chip Stocks UK?
Do you consider blue chip stocks UK as a valuable addition to your investment portfolio? If so, we will now guide you through the different steps you need to follow to start your investment journey.
We have chosen an FCA-regulated broker, eToro, to illustrate the process - primarily because this online provider gives you access to over 2,400 stocks across 17 different exchanges. You will also be able to purchase blue chip stocks at zero commission and no stamp duty.
Regardless, the process is more or less the same on all online brokerage platforms.
Step 1: Create your Broker Account
Go to the homepage of eToro, and click on the 'Join Now' button in the upper right corner.
You will need to enter your personal information, including your full name, residential address, date of birth, and contact details.
As an FCA-regulated broker, eToro is also required to verify your identity. This means you will have to upload an identity card, such as the likes of a passport, and a utility bill.
Step 2: Deposit Funds
The next step is to ensure that there are sufficient funds for you to invest in blue chip stocks. eToro supports a number of payment methods - such as debit/credit cards, bank transfers, or third-party wallets such as PayPal.
Step 3: Purchase UK Blue Chip Stocks
You can enter the blue chip stocks you want to invest in by searching for them at eToro. This will lead you to the trading page of the respective stock.
Click on the 'Trade' icon and then specify how many shares you want to purchase. The minimum investment is just $50.
To complete your commission-free investment on eToro, click on the ‘Open Trade’ button.
You can now track the performance of the blue chip stock over time and hopefully - watch your profits grow.
Best Blue Chip Stocks UK - Conclusion
There are many reasons why blue chip stocks in the UK are monikered as a high-grade asset class. They often have a long-standing track record, with free cash flow, solid balance sheets, and consistent dividends.
If you are contemplating the idea of investing in blue chip stocks UK, the best way to do this is through an FCA-regulated broker such as eToro.
This will ensure that your interests and capital are protected as an investor. Most importantly, you will be able to invest in your preferred stocks without having to pay a single penny in commission - and UK stamp duty is waived!
eToro have proven themselves trustworthy within the stock market over many years – we recommend you try them out.
Your capital is at risk. Other fees may apply
Which companies are known as blue chip stocks?
There is no single way to define blue chip stocks. In broad terms, you tend to be investing in well-established firms with a solid track record.
Is the FTSE 100 made of only blue chip stock companies?
According to some commentators, all companies on the FTSE 100 index have a blue chip status. However, others might argue differently. Many businesses on the index are still comparatively new, and as such, cannot be considered as blue chip stocks.
How to choose the best blue chip stocks UK?
The best blue chip stocks for your portfolio will depend on your trading objectives. If you are looking for high dividend blue chip stocks, British American Tobacco paid a dividend of 7.25% in its latest distribution.
Is it a good idea to invest in a blue chip ETF?
Investing in a suitable blue chip ETF gives you access to dozens or even hundreds of companies through a single trade. The ETF provider will manage the shares on your behalf.
How to invest in blue chip stocks in the UK?
The best way to buy blue chip stocks UK is through an FCA-regulated broker such as eToro.