Getting into the investing world, blue chips companies are no new. It's that famous that investors and even non investors are investing into blue chip companies. But what makes it so special from all the investing options out there? Is it safe or is it risk free? Why is it so popular? Well, in this blog we are covering all about blue chips companies.
What are blue chips companies?
Blue chip companies are usually those big cap companies whose net capital is worth more than a billion. These companies are constantly good at playing the game of paying dividend, little to no debt and having multiple sources of income. They are less volatile and safer options for the investors who don’t intend to watch the price movement closely. Because these companies have top tier management and run with a clear business model, they have constant growth, which is why it is considered best for the long term investment. For the investors, it’s like a wealth generation source of income. It’s not like they don’t have the risk factor, but they are less riskier than small companies. Also it has the benefits of being highly liquidate, which can be sold at any minute when you’re in need.
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Blue chips origin
Blue chip word comes from the game of poker, which has a color of
blue, white and red. Among them, blue is considered high value. Firstly it is
used by Oliver Gingold, in 1923, an employee of Dow Jones, who wrote an article
denoting stocks that are above $200 per share as blue chip stocks. Today these
blue chip stocks are gone so much higher in value.
Features of blue chips companies
1.
Regular and stable dividend
Blue chips companies are known for their solid balance sheet,
proven way of business model and regular payment of the dividend. These companies
are less affected by the economy's condition and making progress each year.
Their stable returns while ensuring the long term growth of the investment,
attracts the investors to invest in them.
2.
High market capitalization
Blue chips companies have the most common feature of having a well
reputed name and large capitalization. Market capitalization measures the value
and size of the company. These companies' capital is usually worth more than a
billion.
3.
Low risk
Blue chip companies have little to no debt and they have multiple
sources of income. They run with a clear business model while making amendments
considering market conditions. Also they have the history of resisting market
downturn, that makes these companies safe investment tools for the investment.
4.
Highly liquidate
These companies are highly liquidated because they are renowned
companies with strong financial papers and sound health of the balance sheet.
While they are giving stable returns and perfect for portfolio diversification,
many investors want them to add to their portfolio which makes them easily
traded stocks in the market. So it is easier to sell these companies’ stock in
case you need an emergency fund.
5.
Less volatile
Blue chips companies are less volatile than the small caps companies.
As they are already crossed all the ups and downs in the market and
successfully created solid balance sheets and clear instruction of business
strategy they become unaffected by market’s movements of fluctuations, which
makes them less volatile. These features attract low risk appetite
investors to invest in them.
Blue chips companies in Nepal
Here we have listed 10 blue chips companies of Nepal that are in
diverse sectors:
1. Nabil bank limited (NBL)
Nabil bank limited is one of the renowned companies in the sector of banking and finance established in july 1984. It is a Dubai government owned majority of shares which was purchased by Nepal's only billionaire Binod Chaudhary in 1995. Currently it has a listed share of 270,569,984 units and stands at an earning price per share at 25.21. Currently it has a market price of Rs.597. In the last fiscal year of 2078/79 it distributed the cash dividend of 11.5% and bonus share of 18.5%.
2. Chhimek laghubittya bitiya sansthan limited (CBBL)
Chhimek laghubittya bittiya sansthan is established with the objective to improve socio-economic conditions of poor, landless and deprived rural women through finance services. It received a micro-finance banking license from the Nepal Rastra Bank in November 2001. It has a market capitalization of 25,802,158,200 and has a Price to Earning ratio of 21.98. In the year of 2078/79 it gave a cash dividend of 3.26% and 22% as a bonus share.
3. Nepal life insurance company limited (NLIC)
Nepal life insurance was established under company act 2053 and
insurance act 2049 as a private company. But later in 2058, Baishak came out as
a public limited company. It has a capital of 820 crore and authorized capital
of 1000 crore. In fiscal year 2077/78, it distributed the cash dividend of
15.7895%, however it hasn't paid dividend in fiscal year 2078/79.
Currently it has a market price of Rs.673.
4. Chilime hydropower company limited (CHCL)
Chilime hydropower is one of the biggest hydropower in the country
operating a 22.1 MW power plant, located in Rasuwa district. It was
incorporated in 1995 where NEA authority hold 51% of the equity and 49% by
general public including 10% from the local people. Today it has a market
capitalization of 41,008,712,932 and selling at price of Rs.565 per share. In
fiscal year 2078/2079, it distributed 50.63 crore bonus to its investors which
includes 7.5% bonus share and 7.5% cash dividend.
5. Salt trading corporation (STC)
Salt trading has a big name in the supply of daily essential
goods. It’s a public private venture established in 1963 to mainly focus on the
supply of salt in the country, but later it is supplying all the daily
essential items like sugar, oil, rice, tea etc. currently it is selling at
Rs.3899 per share and earning price per share is 19.32. In 2078/79 it gave a
bonus share of 10% and 5% cash dividend.
6. Bottlers Nepal limited (BNL)
Bottlers Nepal engages in production, manufacture, sales and
distribution of carbonated non-alcoholic beverages, fruit juice and packaged
drinking water under the brand name of coca cola, sprite and Fanta. It
has two main offices in Kathmandu and terai region making the market
capitalization of 4,330,816,641.40 with listed shares of 1,948,887. In last
fiscal year it gave 20% dividend to its investors in cash. Currently it has
Rs.2222 market price per share.
7. Citizen investment trust
Citizen investment trust is a welfare organization who makes employees assured for their benefits at the time of retirement and post retirement. It has a share outstanding of 42,510,000 and market capitalization of 92,841,840,000. In fiscal year 78/79 it gave a cash dividend of 1.32% and bonus share 25%. Currently it is selling at Rs. 2184 price per share.
8. Soltee hotel (SHL)
Soltee hotel was established 1965 and inaugurated by late king Mahendra Bir Bikram Shah Dev 25 november,1966. It was incorporated by private shareholders, however it transferred its identity to a public company in 1975. It is a 5 star hotel located in Kathmandu city. It has a market capitalization of 3,078,808,408.80 and shares outstanding of 8,847,150. Now it is selling at Rs.21.32 price per share.
9. Unilever Nepal limited (UNL)
Uniliever is a British multinational consumer goods company headquartered in London, England and has been present in Nepal for 28 years. It is one of the biggest manufacturers of daily consumption of goods like soap, shampoo, toothpaste etc. its products are available in 190 countries and has only 921,000 shares. In fiscal year 78/79 it gave cash dividend of 1215% cash dividend to its investors.
10. Himalayan distillery (HDL)
Himalayan distillery is Nepal's largest alcohol producing company
of Nepal. It was established on July 24, 1985 AD as a private company under company
act 2021. Later in March 2000 it was converted into a public limited company
and issued its shares to the public. Currently it has a market price Rs.2295
and shares outstanding of 24,295,666.50 units. In fiscal year 2078/79 it gave a
dividend of 10% cash.
Should we invest on blue chips companies?
Blue chip companies provide stable return, highly liquidate and
come with low risk. With all these features of blue chip companies, it makes
clear that these are good investing options and makes a perfect component of a
well diversified investment portfolio. However, it is not bulletproof, it comes
with drawbacks too. Many people believe that stable return means higher return,
but as it already reached its peaks, it has a lower return compared to rising companies,
so if you want high profit, it might not be suitable for you. Also they have a
higher price tag, which might not be suitable for everyone. So, if you have a
low risk appetite and are planning for a longer term this is a good option for
investment.
Overview
Blue chips companies are well known for their safer option and
good investment for a longer period. They have a history of exceptional
performance and stable and regular return. Depending on your investment goals
and risk appetite you can decide to invest on them or not.