Dividend stocks offer a great way to add cash to your portfolio and help you compound your overall returns over time. Whether you use that dividend money to add to your portfolio or cash it out, these types of stocks can help you diversify the types of companies you own shares in.
When it comes to investing in dividend stocks, you need to ensure that the companies you buy have a strong underlying business and balance sheet that will support and help grow the dividends paid. A blue-chip dividend stock will also have a history of maintaining and increasing its dividend across a wide range of market environments.
With this in mind, here are two blue-chip dividend stocks to consider for your portfolio. Each of them performs well whether the bull market continues or bearish investor sentiment returns. If the bear market returns, these stocks have proven over the decades to be safe bets to hold.
1. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) has paid and increased its dividend every year for 62 years and counting. That puts the pharmaceutical giant in a very select group of companies that have earned that nickname. Dividend King.
J&J has a forward dividend yield of 3.4%, more than twice the average yield among S&P 500 shares. Over the past decade, Johnson & Johnson’s dividends have increased by an average of 6% per year. Its payout ratio is 30%.
J&J’s dividend helps offset the stock’s relatively weak performance over the past few years. The stock’s weak performance also goes some way to explaining the above-average yield. The stock is down due to several factors, but one of the most important is ongoing litigation and potential billions in liability related to its talc products. The company has approximately $26 billion in cash on its balance sheet to help manage these ongoing lawsuits and potentially pay settlements while meeting its commitment to shareholders.
Investing in Johnson & Johnson is also investing in a company that has been around for 138 years and is one of the largest pharmaceutical companies in the world by revenue. Over the past 12 months, the company generated more than $17 billion in profits on revenue of approximately $86 billion. It also generated approximately $24 billion in leveraged free cash flow over the past 12 months.
Last year, J&J spun off its slower-growing consumer health products segment into a company called KenvueThe other two divisions, pharmaceuticals and medical devices, are growing faster and are expected to help J&J accelerate its growth efforts in the coming years. The company has returned about 60% of its free cash flow to investors over the past five years, while 65% of its sales come from products for which it has the first or second largest global market share.
In the short term, this is probably not an activity for growth-oriented investors. However, long-term investors looking for a company that generates consistent financial gains from a broad portfolio of valuable pharmaceuticals and medical devices may find Johnson & Johnson to be an attractive investment opportunity. With its stock price underperforming, Johnson & Johnson’s dividend history makes the company an attractive selection for income-seeking investors. When the underlying issues, including costly litigation, are finally resolved, stock prices will likely rise.
2. Coca-Cola
Coca-Cola (NYSE: KO) has a dividend yield of around 3% and has faithfully increased its dividend every year for 62 years. The beverage giant isn’t generating massive gains in its stock price these days, but its dividend and stock price increases have helped generate a total return of 46% over the past five years and more than 108% over the last 10 years.
Founded in 1886, the company now operates one of the largest beverage groups in the world. Coca-Cola controls approximately 46% of the soft drink market in the United States, one of its largest markets.
Over the past 12 months, Coca-Cola made profits of around $11 billion on revenue of $46 billion. It maintained a profit margin of around 23%, an exceptional figure in an industry where margins are historically thin. The company has a payout ratio of around 74%, which is relatively high but still quite manageable. Its dividend has increased by an average of 5% per year over the past decade.
Over the past 12 months alone, the company generated approximately $12 billion in operating cash flow, with approximately $11 billion in leveraged free cash flow. Currency headwinds and a volatile macroeconomic environment have impacted the company’s growth in recent years, but its commitment to its dividend and balance sheet strength continue to speak to the resilience of this business.
Long-term investors looking for stable portfolio growth and dividends can find many advantages in Coca-Cola.
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Rachel Warren holds positions at Johnson & Johnson. The Motley Fool posts and recommends Kenvue. The Motley Fool recommends Johnson & Johnson and recommends the following options: Long January 2026 $13 calls on Kenvue. The Mad Motley has a disclosure policy.
2 Unstoppable Dividend Stocks to Buy in the Event of a Stock Market Liquidation was originally published by The Motley Fool
