The great thing about dividends is they'll land in your pocket every year no matter what the market or even the particular stock is doing. So you can count on a certain level of income from your portfolio, and importantly, this can add up over time. This means, whether you're an aggressive or cautious investor, dividend paying stocks make a solid addition to your portfolio that you won't regret -- especially during difficult market environments.
Of course, a company could change its policies and drop its dividend payments, but there is a way to minimize that risk. And that's by choosing companies that have a long history of dividend growth. This shows rewarding shareholders is important to them so it's likely they'll continue along that path. You'll find these players on the list of Dividend Kings, or those companies that have lifted their dividends for at least 50 straight years.
If you want decades of passive income, two of these stocks look like great choices to buy now and hold forever.
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1. Johnson & Johnson
Johnson & Johnson(NYSE: JNJ) has increased its dividend for more than 60 years, and the healthcare giant has the financial situation -- thanks to $19 billion in free cash flow -- to keep this growth going. Today, J&J pays an annual dividend of $4.96 per share, representing a yield of 3.1%, and this far surpasses the S&P 500 dividend yield of 1.3%. So it's likely you can count on passive income -- and passive income growth -- well into the future.
But you'll also like J&J for its solid earnings track record as well as a new era of revenue growth down the road. J&J spun off its consumer health business last year in an effort to focus its efforts in areas with the strongest growth potential. The company also has made key acquisitions, such as the purchase of heart recovery medical device business Abiomed, and is pushing new medicines through the pipeline too.
The efforts are paying off. J&J's innovative medicine and medtech units each reported more than 6% growth in sales on an operational basis in the most recent quarter. In innovative medicine, J&J reported a second straight quarter of sales surpassing $14 billion -- and 11 major brands posted double-digit growth. And medtech saw double-digit growth across its cardiovascular portfolio.
Today, J&J shares trade for 15 times forward earnings estimates, a steal for this market giant offering growth and the potential of passive income as far as the eye can see.
2. Abbott Laboratories
Abbott Laboratories(NYSE: ABT) has boosted its dividend payments annually for more than 50 consecutive years, and like J&J, has the financial strength to keep that trend going. This is thanks to free cash flow topping $6.4 billion. Today, Abbott pays a dividend of $2.20 per share at a yield of 1.8% -- also surpassing the dividend yield of the S&P 500.
I also like Abbott for its diversification across healthcare businesses, an element that has helped earnings to steadily grow over time. Abbott includes four units: medical devices, diagnostics, nutrition, and established pharmaceuticals.
If one of these businesses encounters headwinds, another may compensate. For example, today a decline in COVID testing has weighed on the diagnostics business, but double-digit growth in medical devices has helped overall revenue climb more than 8% in the recent quarter. And the company regularly launches new products to power future earnings -- a recent example is Lingo, a continuous glucose monitoring system available without a prescription for health and wellness.
Abbott also has demonstrated confidence in its future by announcing a new share repurchase program of as much as $7 billion in common stock.
Today, you can pick up shares of Abbott for 25 times forward earnings estimates, a valuation that isn't dirt cheap -- but it remains reasonable considering the healthcare giant's earnings track record and commitment to rewarding shareholders.
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 has positions in and recommends Abbott Laboratories. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
