When most of us think about winning in the stock market, we envision the stocks in our portfolios winning. And it is certainly an essential element of investment success. But over time, there’s another thing that could make a big contribution to your earnings: dividend payments. Dividend-paying stocks offer a source of recurring income, boosting your portfolio regardless of the economic or stock market environment. And even if a particular stock is in the doldrums, your losses will be limited thanks to these payouts.
Of course, to get the most out of dividends, it’s a great idea to favor companies with a proven track record, like Dividend Kings. These are players who have increased their payouts over at least the last 50 years. This commitment to rewarding shareholders is likely to continue, making it a safe bet if you’re looking for long-term dividend income.
THE list of dividend kings is long, you may be wondering where to start. Two healthcare stocks make particularly attractive bets thanks to their dividend strength, earnings track record and future prospects. If you want decades of passive income, consider buying these two stocks now and holding them forever.
1. Johnson & Johnson
Johnson & Johnson (NYSE:JNJ) is a healthcare giant; it sells pharmaceutical products across a wide range of therapeutic areas through its “innovative medicine” business, and medical devices through its medical technology business. Last year, the company completed a spinoff of its well-known consumer health business, which sold products like Tylenol and Band-Aid bandages; it was a wise decision, because this unity weighed on growth.
Today, J&J is focused on growth through innovation, with a goal of introducing more than 20 new treatments and 50 product extensions by 2030 – and that’s just in the innovative medicines segment. In the medical technology sector, J&J aims to generate a third of its sales from new products by 2027.
J&J is also growing through acquisitions, recently buying Shockwave Medical to strengthen its position in the high-growth field of cardiovascular intervention. The healthcare giant expects Shockwave to eventually become the medical technology unit’s 13th platform to generate at least $1 billion in annual sales.
All of this means that beyond the dividend payments, J&J is a great stock to buy for potential earnings growth over time.
Now let’s move on to the dividend. The company recently increased its quarterly dividend by 4.2%, its 62nd consecutive year of dividend increases. Based on the quarterly dividend, the company pays an annual dividend of $4.96 per share. Using the June 17 closing price, this reflects a forward price dividend yield of 3.4% — considerably higher than the S&P500 yield of 1.35%.
J&J could therefore become a passive income-generating machine for you over time, making it a top pick to buy and hold.
2. Abbott Laboratories
Abbott Laboratories (NYSE:ABT) is another healthcare powerhouse you can rely on for your profit performance over time. The company has four business units: medical devices, diagnostics, established pharmaceuticals and nutrition. This diversification allows Abbott to seize various market opportunities. For example, in the early days of the pandemic, the company’s diagnostics business helped it become a giant in coronavirus testing. Now, as weight-loss drugs grow in popularity, Abbott’s nutrition business has launched a brand to support those on the weight-loss journey.
Abbott’s four business units have shown strength of late. During the most recent quarter, established medical devices and pharmaceuticals grew revenues by double digits, while diagnostics and nutrition products grew revenues by mid-to-high single digits. That helped Abbott report sales growth in its core business — which excludes COVID-19 test sales — of more than 10%, the fifth consecutive quarter of double-digit growth.
So it’s clear that you can count on Abbott’s earnings strength over the long term. And like J&J, you can also count on Abbott for your passive income.
The company pays an annual dividend of $2.20, and using the June 17 closing stock price, it yields 2.1%. This is another example of outperforming the S&P 500.
And that means that over time, an investment in Abbott could provide you with significant ongoing income, regardless of what the market does.
Should you invest $1,000 in Johnson & Johnson right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool features and recommends Abbott Laboratories. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
Want decades of passive income? 2 stocks to buy now and hold forever. was originally published by The Motley Fool
