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These dividend players could lift your portfolio no matter what the market is doing.
The stock market is going strong, with the S&P 500 index heading for a 19% gain so far in 2024, confirming its presence in a much-awaited bull market. These periods of market growth and optimism generally last longer than bear markets, so there still could be plenty of time for investors to benefit from this great momentum.
However, even in times of market strength, headwinds arise. That happened this summer when a stock market sell-off resulted in an 8% loss for the S&P 500 over a period of three weeks. At those times, which could happen even in a solid bull market, it’s a great idea to load up on stocks that may limit your losses during periods of trouble.
One of the best options is a dividend stock because it offers you annual passive income no matter what its stock price or the market is doing. Let’s check out two unstoppable players to buy if there’s another market sell-off.
Image source: Getty Images.
Johnson & Johnson
Johnson & Johnson (JNJ -0.27%) is a Dividend King, meaning it’s raised its dividend for more than 50 consecutive years. In fact, J&J has lifted its dividend for more than 60 years.
Why is this important? Because it shows that rewarding shareholders is a priority for J&J, so it’s likely the company will continue with this policy.
Right now, the pharma giant pays an annual dividend of $4.96 a share, representing a dividend yield of 3%. This is considerably higher than the average S&P 500 dividend yield of 1.3%.
Another positive point is that J&J, with free cash flow of $19 billion, has what it takes financially to continue paying and raising its dividend. This offers you some confidence that even during difficult market times, you’ll collect passive income — and it’s likely to grow.
You’ll like J&J for more than its dividend, though. This pharma giant also offers you another reason to hold onto it through market downturns — and that’s the safety of its earnings.
J&J sells a wide variety of medicines and medical devices — and these are products patients and hospitals need during any economic environment. This is why pharma companies generally don’t see enormous fluctuations in revenue when the economy takes off or stalls.
But they still can boost their growth through portfolio expansion and strategic decisions — and this is what J&J did in recent years when it spun off its consumer health business to focus on its innovative medicines and medtech divisions. Both of these divisions are growing and helped the company report a 7% increase in sales, excluding acquisitions and divestitures, in the most recent quarter.
By investing in J&J, you’ll benefit from dividends and the promise of earnings strength over time.
Abbott Laboratories
Abbott Laboratories (ABT -1.28%) is another company you can count on for dividend growth. Like J&J, Abbott is a Dividend King, showing its commitment to sharing its successes with shareholders.
The company pays an annual dividend of $2.20 at a yield of 1.9%, surpassing the yield of the S&P 500. It’s increased its dividend for 52 straight years and just recently announced its 403rd consecutive quarterly dividend.
Like J&J, Abbott has the financial strength, with free cash flow of $5.6 billion, to continue along this path. Abbott has proven its ability to grow earnings over time, and I particularly like the diversification of its offerings across four segments — medical devices, diagnostics, nutrition, and established pharmaceuticals.
If one of its businesses faces headwinds, another may compensate. We’re seeing this today as the strength of the medical device business helps Abbott grow, even as a decline in COVID-19 testing weighs on the diagnostics business. And thanks to the medical device business’ revenue growth of more than 10% in the recent quarter and gains by nutrition and pharmaceuticals, the company raised its annual revenue guidance.
Abbott’s deep pipeline also keeps growth going, and that’s set to continue. Earlier this year, the company announced 10 new growth opportunities from the pipeline. This involves new approvals and expanded indications for already approved products.
All of this makes Abbott unstoppable. It could score a major win for your portfolio over time and pay you passive income while you wait.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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