Blue chip shares are shares in large, well-established companies with a long history of stable earnings, strong balance sheets, and — often — consistent dividend payments. In Australia, blue chip shares typically refer to companies in the ASX 20 or ASX 50 index, including the Big Four banks, BHP, Woodside Energy, Wesfarmers, and Woolworths.
What Makes a Share “Blue Chip”?
There is no official definition of blue chip, but Australian investors generally look for:
- Large market capitalisation (typically $10 billion+)
- Long operating history (10+ years listed)
- Strong brand recognition or market-leading position
- Consistent earnings and dividend history
- Inclusion in the ASX 20, ASX 50 or ASX 100 index
The term comes from poker — blue chips are the highest value chips. In investing, it refers to shares considered high quality and relatively lower risk compared to smaller companies.
Major Blue Chip Shares on the ASX
The following companies are commonly considered Australian blue chip shares:
| Company | ASX code | Sector |
|---|---|---|
| Commonwealth Bank | CBA | Financials |
| BHP Group | BHP | Materials (mining) |
| CSL Limited | CSL | Healthcare |
| National Australia Bank | NAB | Financials |
| Westpac Banking Corp | WBC | Financials |
| ANZ Group | ANZ | Financials |
| Wesfarmers | WES | Consumer Discretionary |
| Woolworths Group | WOW | Consumer Staples |
| Macquarie Group | MQG | Financials |
| Woodside Energy | WDS | Energy |
| Telstra | TLS | Communication Services |
| Rio Tinto | RIO | Materials |
| Transurban Group | TCL | Infrastructure |
| Fortescue | FMG | Materials |
| ResMed | RMD | Healthcare |
This list is informational only and is not a recommendation to buy or sell any security.
Why Do Investors Hold Blue Chip Shares?
Stability — Large established companies tend to be more resilient during economic downturns than smaller companies, though no share is immune to losses.
Dividends — Australian blue chips, particularly the major banks and resource companies, have historically paid regular, often fully franked dividends. This provides income for investors.
Franking credits — Many blue chips (CBA, WBC, NAB, ANZ, WES, WOW) pay fully franked dividends, meaning they come with a tax credit that can offset or reduce Australian investors’ tax bills. See the franking credits guide for more detail.
Liquidity — Blue chip shares trade millions of units per day — buying and selling large positions is straightforward with tight bid/ask spreads.
Inclusion in index ETFs — Blue chips are the major constituents of ASX-tracking ETFs like VAS and A200. An investor buying these ETFs automatically holds the largest blue chip companies.
Limitations of Blue Chip Investing
- Concentration risk in Australia — The ASX is heavily weighted toward financials (Big Four banks) and materials (mining). Holding only Australian blue chips means significant exposure to these two sectors.
- Blue chips still fall — In the 2020 COVID crash, CBA fell from ~$91 to ~$55 (a 40% drop). Blue chip does not mean immune to large price falls.
- Past performance — A company’s blue chip status reflects its history, not a guarantee of future performance. Kodak, Nokia, and many other global “blue chips” ultimately failed.
- Growth potential — The largest companies often have slower earnings growth than smaller companies, because growing a $200 billion business is much harder than growing a $2 billion business.
Blue Chips vs. ETFs
Many Australian investors choose ETFs like VAS (Vanguard Australian Shares Index ETF) instead of selecting individual blue chip shares. VAS holds the 300 largest ASX companies — the top 20 make up around 45% of the fund, meaning you get exposure to blue chips automatically.
ETFs offer diversification across all 300 holdings versus the concentration risk of holding 5–10 individual blue chips.
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Frequently Asked Questions
Are blue chip shares safe? Blue chip shares are generally considered lower risk than small-cap shares because of their size and earnings history. However, “lower risk” does not mean risk-free — all shares can fall significantly in value, including Australia’s largest companies. Diversification across multiple sectors and asset classes is important for managing investment risk.
Do blue chip shares pay dividends? Many Australian blue chip shares pay regular dividends — this is one of their attractive characteristics, particularly the Big Four banks, Wesfarmers, and Woolworths. However, dividends are not guaranteed and can be reduced or suspended during difficult periods (the major banks cut dividends in 2020 during the COVID-19 pandemic).
Should I buy individual blue chip shares or an ETF? An ETF like VAS or A200 automatically gives you diversified exposure to Australia’s largest companies, including all the major blue chips, for a single brokerage fee. Buying individual blue chip shares means selecting specific companies — which introduces concentration risk if one company performs poorly. For most long-term investors, diversified ETFs are a simpler approach.
This article provides general financial information only. Company mentions are for educational purposes and are not a recommendation to buy or sell. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.