There is a tendency for younger investors to eschew older, established blue-chip stocks.
Instead, they may chase the latest fad or place their money in growth stocks whose share prices are soaring higher.
However, I believe that there is a place in every investor’s portfolio for blue-chip names.
Blue-chip stocks are defined as companies of a certain size and market capitalisation that have a strong business model.
Their resilience over different economic cycles allows them to coast through different macroeconomic conditions and emerge relatively unscathed.
Here are some reasons why I believe that blue-chip stocks should occupy a place in every investor’s portfolio, no matter whether young or old.
The pillars of the economy
Blue-chip stocks, by their very definition, represent the pillars of Singapore’s economy.
Take the three local banks, for instance.
DBS Group (SGX: D05) is the largest of the three by market capitalisation and is an important lender for individuals and businesses who seek property and business loans.
OCBC Ltd (SGX: O39) and United Overseas Bank (SGX: U11) also provide banking, insurance, and investment services to a wide swath of customers.
Owning a stock of any or all of these three banks is akin to owning a slice of Singapore’s economy.
With robust economic growth and a well-managed government, an investment in the banks will provide you with peace of mind as these lenders grow in tandem with the country.
Then, some companies provide telecommunication, engineering, and industrial services.
Singtel (SGX: Z74) is Singapore’s largest telco and provides mobile, cybersecurity, and broadband services.
Seatrium (SGX: 5E2) provides innovative engineering solutions for the offshore, marine, and energy sectors.
And Keppel Ltd (SGX: BN4) is an asset manager that provides sustainability solutions in infrastructure, real estate, and connectivity.
Together, these companies provide products and services to a large portion of the population and a large group of businesses.
By buying into a slice of these companies, you can also participate in the growth of these sectors, as these are established players with long track records.
Steady, dependable income
Apart from peace of mind, blue-chip stocks can also supply you with a stream of dependable dividend income.
Take Singapore Exchange Limited (SGX: S68) for example.
The bourse operator has paid a dividend every single year since it listed back in 2000.
The latest quarter dividend is S$0.09, translating into an annual dividend of S$0.36.
Singapore Technologies Engineering (SGX: S63) is another reliable dividend payer.
The engineering giant has paid a S$0.15 annual dividend since 2017 and raised this to S$0.16 in 2022 and then to S$0.17 in 2024.
Then, there are also the REITs within the blue-chip stable.
REITs, or real estate investment trusts, are portfolios of investment properties that earn a reliable stream of rental income.
90% or more of REITs’ net profit is then paid out as distributions to unitholders so that REITs can enjoy tax benefits.
REITs such as Frasers Centrepoint Trust (SGX: J69U) and CapitaLand Integrated Commercial Trust (SGX: C38U) have been steadily supplying dividends even through the pandemic.
Healthy dividend yields
Not only do blue-chip stocks pay dividends, but some of them also sport attractive dividend yields that can help you to bear inflation.
DBS paid out a quarterly dividend of S$0.75 for its most recent quarter, comprising a core interim dividend of S$0.60 and a capital return dividend of S$0.15.
The bank’s annualised dividend per share is S$3, giving its shares an attractive forward dividend yield of 6.7%.
Mapletree Industrial Trust (SGX: ME8U) also provides an attractive distribution yield.
The industrial REIT’s latest full fiscal year distribution per unit stood at S$0.1357, giving its units a trailing distribution yield of 6.7%.
The potential for further growth
But blue-chip stocks are not just good for stability and income.
Many of them can also post growth along the way, leading to healthy share price appreciation.
For instance, Keppel has reinvented itself with its Vision 2030 strategic plan.
The asset manager has transformed from a conglomerate with lumpy, order-book-based earnings to a more streamlined structure with recurring income sources.
Singapore Technologies Engineering has also charted a path to stronger growth during its recent Investor Day 2025.
The engineering group is looking at achieving healthy top-line growth and is committed to paying out increasing levels of dividends.
Get Smart: Anchor your portfolio with blue-chip stocks
The merits of blue-chip stocks should be clear by now.
Not only do these companies provide stability and peace of mind for your portfolio, but they also generate an attractive income stream that can help you beat inflation.
In addition, some blue-chip stocks also demonstrate healthy growth that can garner capital appreciation over time.
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Disclosure: Royston Yang owns shares of DBS Group, Singapore Exchange, and Mapletree Industrial Trust.
