When it comes to deciding what dividend stocks to own in long-haul portfolios, a company's quality and consistency are more important than a sky-high dividend yield that can portend trouble lurking around the corner. In a bid to help you find top-notch dividend stocks to buy, we asked our Motley Fool investors to scour the market for high-quality companies that are likely to have dividend-friendly staying power. Read on to discover why they settled on Microsoft (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ), and PepsiCo (NASDAQ:PEP) as stocks to stash away in income portfolios for the long-term.

Riding the wave of next-gen technology

Todd Campbell (Microsoft): Why would I recommend a maker of PC software for a forever portfolio? Because it's no longer fair to think of Microsoft as a PC play. Microsoft has become a cloud-software services giant, it's a leader in artificial intelligence (right, Cortana?), and it's a behemoth in online gaming. These "next-gen" businesses represent an increasingly larger share of Microsoft's revenue, and they're throwing off plenty of cash to support Microsoft's dividend-darling status with investors.

A clock on a table next to a row of increasingly taller stacks of coins and a jar full of money.


Microsoft's recent fiscal fourth-quarter earnings show there's a lot to cheer about when it comes to these businesses, but perhaps the biggest bright spot is Azure. Developers and IT departments are increasingly using Azure to manage applications on data centers, and last quarter, Azure's revenue increased 97% year over year. Thanks to Azure, Microsoft's intelligent-cloud sales were $7.4 billion last quarter, up 11% from last year.

Microsoft's also benefiting from its decision to make its Office suite of software available anywhere there's an Internet connection, and preorders for its upcoming video-gaming console, the Xbox One X, are running at a record-setting pace that suggests future gaming revenue growth. As companies embrace new ways to create, store, manage, analyze, and deploy content, it's hard to imagine that Microsoft won't be among the short list of companies that people will turn to. If so, then Microsoft's sales and profit growth should accelerate, allowing it to return even more money to investors in the form of dividends.

MSFT Revenue (TTM) Chart

MSFT Revenue (TTM) data by YCharts

Give your portfolio a health checkup

Demitri Kalogeropoulos (Johnson & Johnson): Healthcare titan Johnson & Johnson hasn't missed a dividend increase in 54 consecutive years, and I believe there's a good chance it will continue that awesome streak for decades to come. Recent operating results have been impressive, after all. Organic sales growth sped up in Johnson & Johnson's consumer segment and gave management the confidence to raise both revenue and earnings forecasts for the year.

There are two key reasons this business is likely to maintain its dominant market position over the long term. First, it benefits from a uniquely diverse revenue base thanks to its collection of over 250 companies that touch every aspect of the healthcare industry. Second, Johnson & Johnson's pipeline of drug innovations is stronger than it's ever been. That's mainly thanks to an annual research-and-development budget that touched $7 billion last year, up from $6.2 billion in 2014. Few, if any, companies can hope to match such an aggressive allocation toward drug research. 

CEO Alex Gorsky and his management team believe that their robust product pipeline will help organic sales growth speed up over the next few quarters as new pharmaceuticals, including psoriasis treatment Tremfya, advance into the market. Income investors, meanwhile, can collect a market-beating 2.6% yield that has a good chance of pairing with stock-price gains to generate strong returns in the coming years. 

Make your dividend portfolio a little healthier

Dan Caplinger (PepsiCo): Dividend investors want to invest in companies that have stood the test of time and continue to demonstrate an ability to adapt to new business conditions in their industries. PepsiCo has done all of these things, becoming a leader in the beverage and snack business and avoiding some of the problems that have held back their peers.

PepsiCo was a pioneer in identifying the need to meet consumer demand for healthier offerings in the snack and drink categories. Even as other companies were touting supersized packaging and products that raised new health concerns, PepsiCo instead looked at expanding its scope to emphasize new products such as juice, tea, and hummus. Offering favorite products in portion sizes that allow consumers to indulge without ruining their health strategies have also paid off for the company, and although PepsiCo is still having to deal with issues such as the threat of taxes on sugary soft drinks, it is better positioned to make a shift and stay popular with its core customer base.

PepsiCo has paid dividends consistently for decades, with 45 straight years of providing dividend growth to its shareholders. Its most recent 7% dividend increase came in May, and the current 2.8% yield gives dividend investors ample current income. PepsiCo has shown that it can lead its industry and should keep paying dividends for the rest of your life.