Pay attention to the three qualities that most successful stocks have in common.

Blue chip companies can give investors an additional measure of safety in volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

The most successful stocks are often blue chip companies. Discover the qualities of these companies below.

3 qualities of the most successful stocks

1. The most successful stocks come from successful companies: Our first investing rule tells you to buy high-quality stocks. These stocks have generally been succeeding in business for a decade or more, perhaps much longer. But in any case, they have shown that they have a durable business concept. They can wilt in economic and stock-market downturns, like any stock. But most thrive anew when the good times return, as they inevitably do.

2. The most successful stocks maintain or increase their dividends: Apart from a high dividend yield, you should look for stocks that have a long history of paying (and raising) their dividends. For a true measure of stability, focus on those companies that have maintained or raised their dividends during economic and stock market downturns.

That’s because these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they provide an attractive mix of safety, income and growth.

3. The most successful stocks have strong balance sheets, hidden assets, and experienced management teams: We seek an experienced management team with proven capability. A balance sheet is a financial statement that gives a snapshot of a company’s assets, liabilities and shareholders’ equity. We use this data to determine how sound a company’s finances are—and also to discover if it has any “hidden assets.” Furthermore, the best hidden assets will eventually expand a company’s profit, grab investor attention, and push up its stock price.

Take a broad view when looking for the most successful stocks

When we’re looking for the best investments to recommend in our newsletters and investment services, we start by putting all the important information we know about a company into perspective.

But things are never quite so simple. Your stock pick’s latest earnings may reflect unusually favourable or unfavourable conditions. This can make the company look safer or riskier than it really is. In addition, the company may put the funds it borrowed to profitable use immediately, increasing its earnings and its ability to pay interest. It may plan to sell assets to reduce debt, or cut costs to increase earnings.

In the end, there are many ways you can try to put the facts about a company into perspective. None are perfect, since all involve a mental balancing act between high and low estimates, history and the future, and faith versus skepticism.

Our goal is to put the information in a form that lets us weed out the extremes—excessively overvalued stocks, or those that are suspiciously cheap. In the long run, investors make most of their profits in investments that offer good value and an attractive long-term outlook.

The most successful stocks pay off in the long term

Follow our rules over long periods and you’ll probably achieve better-than-average investing results.

Over long periods, you’ll likely find that a third of your stocks do about as well as you’d hoped, a third do better, and a third do worse. This is partly due to that random element in stock pricing that we’ve often mentioned. It also grows out of the proverbial “wisdom of the crowd.” The market makes pricing mistakes and continually reverses itself. But the collective opinion of all individuals buying and selling in the market eventually beats any single expert opinion.

The best way to minimize losers is to understand the underlying message of our three rules, and apply them more diligently. Be very careful about the quality of the stocks you buy. Diversify and balance your holdings. Avoid fads.

You’ll still have losers in your portfolio. But your gains should more than offset your losses, and leave you with a healthy margin of profit.

How do you find good stocks before their price goes too high?

What qualities do you look for successful stocks? Would you add something to these three?