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Are large ASX blue chips reliable?

Tristan Harrison
Share price recovery chart

ASX blue chips are meant to be the most reliable, dependable businesses on the ASX.

There is no set definition, but they have market capitalisation in the billions, they’ve been around for a long time and they are noticeable parts in Australia’s economy.

Businesses like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Telstra Corporation Ltd (ASX: TLS), BHP Group Ltd (ASX: BHP), Woolworths Group Ltd (ASX: WOW) and JB Hi-Fi Limited (ASX: JBH) could all be called blue chips.

Banks have had a torrid time because of what was uncovered in the royal commission. Westpac is facing a massive fine from AUSTRAC. Telcos like Telstra and TPG Telecom Ltd (ASX: TPM) have been damaged by the NBN.

We’ve seen companies like Woolworths and AP Eagers Ltd (ASX: APE) admit they have underpaid thousands of staff by millions of dollars.

Many of the ASX’s blue chips have been disappointing over the past five years. 

The best thing about the concept of shares is that they can grow their profit over the long-term whilst also paying out dividends to shareholders. Plenty of our blue chips aren’t actually going profit right now. 

But, there’s so much disruption, competition and regulations affecting most blue chips these days that I can’t see many of our largest companies delivering average returns per annum of 10% or more into the future unless they expand overseas.

Foolish takeaway 

Blue chips may be decent options to improve your income but I think future capital growth will come from the upcoming businesses, the future big blue chips like Altium Limited (ASX: ALU), Webjet Limited (ASX: WEB), REA Group Limited (ASX: REA), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW) could be future ASX50 or ASX20 shares.

The post Are large ASX blue chips reliable? appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison owns shares of Altium and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Brickworks, REA Group Limited, and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019