The stock market is coming off of four positive weeks, but you wouldn't know it by looking at the dividend-paying stocks on this list. Both are down near 52-week lows.
These stocks have been having a lousy time lately, but their underlying businesses keep putting up consistently positive results. Both have over a decade of consecutive annual dividend raises under their belts. They also have durable competitive advantages that could allow them to keep raising their dividend payouts for many years to come.
Here's why they make great portfolio additions for just about anyone who wants a steadily growing passive income stream.
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1. Johnson & Johnson
Johnson & Johnson (JNJ -0.46%) spun out its consumer health segment as Kenvue earlier this year. Shares of the healthcare conglomerate have slid about 14% this year, even though sales and earnings are rising at an above-average pace for this company.
Johnson & Johnson's stock is down this year partly because dividend stocks are less attractive to big institutional investors. These days, you can receive risk-free Treasury yields above 5% for the first time in more than 15 years.
Johnson & Johnson's performance could be a little more volatile than usual now that it no longer sells consumer staples like Listerine, Tylenol, or Band-Aids. With a sharpened focus on pharmaceuticals and medical technology, though, earnings growth has already begun to accelerate. Third-quarter adjusted earnings per share rocketed 19.3% year over year even though sales rose just 6.8% over the same time frame.
Hospitals that already spent a fortune training surgeons how to install Johnson & Johnson's medical technology products are hesitant to switch to competing devices. High switching costs aren't the company's only competitive advantage, either.
In August, Johnson & Johnson earned approval from the U.S. Food and Drug Administration to market a new blood cancer treatment called Talvey. Priced at $45,000 per month, Talvey sales could reach $1 billion annually in a few years, and it's just one of several new treatments emerging from the company's development pipeline.
At recent prices, you can buy shares of Johnson & Johnson for 15.1 times forward-looking earnings estimates. That's a fair price to pay for a great business, plus it offers an attractive dividend. This April, Johnson & Johnson raised its quarterly payout for the 61st consecutive year. Now that the stock has been beaten down, the shares offer a juicy 3.1% dividend yield.
2. Waste Connections
Shares of Waste Connections (WCN -1.03%) have traded sideways throughout 2023, partly because its bottom line appears to have flatlined. During the first nine months of 2023, earnings according to generally accepted accounting principles (GAAP) rose by less than 1% year over year.
Landfills are rarely close to each other, and hauling tons of garbage around burns a lot of fuel. This combination makes it easy for landfill owners like Waste Connections to raise prices without losing any business. Frustrated customers who want to ship their waste to a lower-cost competitor never do because fuel expenses chew through any potential savings.
For a couple of years now, Waste Connections has been snapping up smaller landfill operators. That's making GAAP earnings look lousy despite strong underlying growth. Once adjusted for nonrecurring expenses, earnings during the first nine months of 2023 are up 5% year over year. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are up 13% over the same time frame.
Waste Connections offers a dividend yield of just 0.9% at recent prices. This stock's contribution to your passive income stream might start small, but it won't stay that way for very long. In October, the company raised its payout by 11.8%, and big bumps like this aren't uncommon. The company has increased its quarterly payout a stunning 470% since its dividend program began in 2011.
At its somewhat depressed price, you can buy Waste Connections shares for the relatively low price of 32.1 times forward-looking earnings estimates. This is a fair price to pay for a company with a bottom line that could rise by a high-single-digit percentage each year for decades to come. Patient investors who buy the stock now could realize market-beating gains over the long run.
