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Dividend stocks can provide resilience and growth to your portfolio in a wide variety of market environments. When you’re looking to boost your stable of income stocks, it’s important to focus on companies that not only have a history of maintaining and raising their dividend, but have a track record of doing so over many years in both up and down markets.
Here are two fantastic dividend stocks that fit that bill and are no-brainer buys as investors kick off a new month in 2023.
1. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) has raised its dividend for 60 years in a row and counting. At the time of this writing, the healthcare giant pays a dividend that yields around 3%. And over the trailing decade, that dividend has grown by roughly 71%, while the stock has delivered a total return of 153% during that same period of time.
When Johnson & Johnson spins off its consumer health division into a new company called Kenvue this year, both the newly combined medtech and pharmaceutical business (which will retain the company’s long-standing name) and the spin-off company will pay dividends. These businesses have each been on very different growth trajectories, and there’s no doubt that these separate entities will continue on their own paths. Shareholders of Johnson & Johnson at the time of the split can decide whether the growth stories of one or both businesses align with their overall portfolio objectives.
In 2022, Johnson & Johnson reported total sales of $95 billion, paired with net earnings of $18 billion. That represented 1.3% growth on the top line from 2021, while earnings were down year over year but up 19% on a three-year basis.
Johnson & Johnson’s consumer health business is known for products like Tylenol, Motrin, and Listerine — products that the consumer populace buys regularly and uses on a daily basis. The pharmaceutical business features a range of blockbuster, established, and emerging products — from cancer drugs to immunotherapy medications — while the medical device business features products ranging from plates and screws used in trauma surgeries to heart pumps.
The thing about these types of businesses is that they tend to be highly resilient in a wide range of economic environments due to the essential nature of the products they sell. For example, management thinks that the pharmaceutical business — historically the fastest-growing of the three — will reach $60 billion in annual sales by 2025.
For investors seeking a tried-and-true healthcare stock to add to a portfolio and hold forever — not one that will necessarily yield lightning-fast growth, but can deliver steady returns in a wide range of environments — Johnson & Johnson could be worth a long, hard second look.
2. Procter & Gamble
Procter & Gamble (NYSE: PG) is another long-standing dividend payer. The company has a 66-year history of both paying and raising its dividend without interruption. The stock, which yields 2.7% based on current share prices, has seen its dividend increase by approximately 52% in the past 10 years. Meanwhile, investors who stayed with Procter & Gamble throughout that period have benefited from a total return of 142%.
Like the previous stock on today’s list, Procter & Gamble is known for its broad portfolio of household name brands. These include everything from Pampers, Bounce, and Tide to Bounty, Tampax, and Gillette. These products don’t tend to produce very high margins, but they are required and used by consumers no matter what is happening out in the world or with the economy.
So, while the elevated costs of operating in a high-inflation, supply chain-constrained environment have affected Procter & Gamble’s margins in recent quarters, there remains consistent demand for its products that is driving steady revenue generation and profitability.
While net sales and net earnings represented single-digit percentage decreases from the year-ago period against the backdrop of these macro factors, Procter & Gamble still reported $21 billion on the top line and $4 billion on the bottom line in the most recent quarter. These figures were driven by respective growth of 3%, 8%, 8%, and 4% in its beauty, healthcare, fabric/home care, and baby/feminine/family care segments.
The company also generated operating cash flow of $3.6 billion in the three-month period, and closed the quarter with just shy of $7 billion in cash on its balance sheet.
Taking a step back, over the trailing five years, Procter & Gamble has seen its annual revenue grow by 20%, while its bottom line has increased by 51% in that same 10-year time frame. Meanwhile, the company has grown its cash from operations in the amount of 13% in that same window of time.
This isn’t a business that’s going to make investors rich overnight (and few will, for that matter). Still, for investors seeking a stable growth business with a diverse lineup of products and consistent consumer demand (even in a recession, people still buy laundry soap, razors, and toothpaste), then Procter & Gamble could be worth adding to your buy basket.
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Rachel Warren has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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