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2 Dividend Stocks Not At Risk of Cutting Their Payouts

By Prosper Junior Bakiny - Apr 14, 2020 at 8:20AM

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These two companies will handle the ongoing COVID-19 outbreak better than most.

With the COVID-19 pandemic forcing people to stay at home -- and significantly reducing economic activity -- many businesses are struggling to stay afloat, and will likely continue grappling with the aftermath long after the outbreak ends. As a result, many of these companies will be forced to slash or suspend their dividend payouts as a way to save money, much to the dismay of their shareholders.

However, other companies will handle the current economic climate just fine and will continue to reward their shareholders by way of dividend payouts throughout this crisis. Here are two dividend stocks that are unlikely to cut their payouts anytime soon: Johnson & Johnson (JNJ 0.23%) and Medical Properties Trust (MPW -0.03%)

A dividend you can bank on

To income-oriented investors, Johnson & Johnson needs no introduction. The company is a Dividend Aristocrat, having increased its payouts for more than 50 consecutive years. However, Johnson & Johnson's history as a dividend stock isn't the only reason why I think the company is unlikely to slash its dividends anytime soon; let's consider two more reasons. 

Glass jar full of coins with dividend label.

Image source: Getty Images.

First, the healthcare giant is handling the market crash better than most. Year to date, shares of Johnson & Johnson are down by 4.2%, compared to a 14.5% decline for the S&P 500. And that's not an accident. Johnson & Johnson's business revolves around marketing drugs -- many of them life-saving medicines -- which are one of the last things anyone would choose to cut back on, even in a recession. In short, Johnson & Johnson's revenue and earnings likely won't take a big hit as a result of the current economic climate.

Second, Johnson & Johnson is one of the few companies with a AAA rating from Standard & Poor's, which is a sign of financial fortitude. The pharma giant is unlikely to run into serious financial troubles anytime soon. 

Of course, Johnson & Johnson isn't perfect, and investors should keep a few things in mind when it comes to this company. Most notably, Johnson & Johnson is currently facing scores of lawsuits. For instance, in January, New Mexico filed a lawsuit against Johnson & Johnson alleging that the company misled customers about the safety of its talcum-based baby powder. There are many more lawsuits Johnson & Johnson is currently handling, but the company has said these lawsuits won't have a significant material effect on its financial results. 

While I think investors should continue to monitor the development of Johnson & Johnson's legal troubles, the company's dividend will likely be safe despite these obstacles. Johnson & Johnson's current dividend yield is 4.7%, which compares favorably to that of the S&P 500 at 2.31%. Investors can be reasonably confident that the healthcare company won't cut its dividend payouts anytime soon. 

The ongoing outbreak won't hurt this REIT

As a real estate investment trust (REIT), Medical Properties Trust is required to pay at least 90% of its taxable income as dividends. But that's not the only reason why I think this company won't cut its payouts in the near future.

Medical Properties -- as its name suggests -- focuses primarily on healthcare facilities. In particular, Medical Properties' portfolio is comprised mostly of acute care hospitals; it includes about 389 facilities in the U.S. and several other countries, including the U.K. Given the ongoing COVID-19 outbreak, many hospitals are taking in more patients than they otherwise would have. 

And while no one wishes for a public health crisis, the fact of the matter is that the current situation will likely result in Medical Properties' bottom line remaining intact. Thus, investors can be confident that Medical Properties' dividend is safe; the company currently offers a 5.7% dividend yield.

Medical Properties' forward price-to-earnings (P/E) ratio is 16, and while that isn't exactly cheap, the company's valuation is more attractive now than it was at the beginning of the year as a result of the recent market correction. In short, for income-seeking investors looking for companies with dividends they can trust, now may be as good a time as any to consider purchasing shares of Medical Properties.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$170.57 (0.23%) $0.39
Medical Properties Trust, Inc. Stock Quote
Medical Properties Trust, Inc.
$16.21 (-0.03%) $0.01

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