When it comes to investing for retirement, it's often best to focus on income-yielding stocks that can supplement your Social Security benefits and generate reliable returns for your portfolio for years to come. But with so many dividend stocks to pick from and so much information about each company to wade through, narrowing down your choices isn't always easy.
If you're on the hunt for winning stocks to add to your portfolio for retirement, you've come to the right place. Here are three popular dividend stocks that could help shield your portfolio if the market crashes again, while producing meaningful growth in the years ahead.
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1. Johnson & Johnson
Johnson & Johnson (JNJ 0.94%) is a household name with over 130 years in business behind it. The pharmaceutical stock pays a dividend that yields 2.6%. It also happens to be one of fewer than 30 stocks that boast the elite title of Dividend King, as Johnson & Johnson has boosted its dividend every year for close to six decades.
Johnson & Johnson's diverse portfolio of products, particularly those in its pharmaceutical and consumer health segments, has served as a formidable rudder to help it navigate through the coronavirus economy despite near-term challenges. Sales of products like Listerine, Tylenol, immunosuppressive drug Stelara, and anti-cancer medication Darzalex have all been drivers of the company's top line in 2020.
Johnson & Johnson's first-quarter sales grew 3.3% year over year, followed by a 10.8% drop in sales the following quarter. The company came back swinging in the third quarter, reporting a nearly 2% sales increase on a year-over-year basis and 101.5% earnings per share growth. Johnson & Johnson's third-quarter performance was such a marked improvement from the second quarter that management went ahead and boosted its full-year sales guidance by a whopping $1 billion.
However, the development that investors are most excited about at the moment is Johnson & Johnson's COVID-19 vaccine candidate (JNJ-78436735), which its subsidiary, Janssen Pharmaceuticals, is developing. On Dec. 17, Johnson & Johnson announced that it had completed enrollment for its 45,000-subject phase 3 Ensemble study of JNJ-78436735. Interim data from the Ensemble study, which will test the safety and efficacy of a single dose of JNJ-78436735, is expected in January.
Considering that both Moderna's (MRNA 0.51%) and Pfizer's (PFE 0.19%) coronavirus vaccines involve a two-dose regimen, Johnson & Johnson could prove to be a serious disruptor in the COVID-19 vaccine race if its single-dose vaccine wins authorization and eventually approval. Interim data previously released from the phase 1/2a clinical study of JNJ-78436735 showed "that a single dose induced a strong neutralizing antibody response in nearly all participants aged 18 years and older and was generally well-tolerated."
The company is also running a second phase 3 study (Ensemble 2) in which subjects will receive two doses of JNJ-78436735. Given ongoing supply constraints, Johnson & Johnson could still gain considerable ground in the coronavirus vaccine race even if its two-dose regimen turns out to be the more efficacious treatment course. Johnson & Johnson has already inked agreements to supply hundreds of millions of doses to governments around the world if JNJ-78436735 gains regulatory approval, including with the European Commission, the U.S., and the U.K.
Johnson & Johnson's storied history and profitable, diverse lineup of products make it a compelling buy for a recession-proof retirement portfolio. Combine that with its excellent dividend and the potential success of its coronavirus vaccine, and you have one invincible stock.
2. Target
2020 certainly wasn't a great year for most retail stocks, but in the case of Target (TGT 3.31%), investors had nothing to worry about. Target's essential-store status combined with a robust online presence made it one of the top retail stocks to buy for the recession-proof retirement portfolio. Target's dividend yield (1.5%) is slightly lower than that of the average stock on the S&P 500, but it has such a stellar history of increasing its payout that the company's on track to reach Dividend King status in 2021.
Investors are quickly recognizing the combination of growth and value that Target offers its shareholders. The stock has gained roughly 37% over the past year, but still trades at an affordable 23 times earnings.
Target has reported double-digit sales growth in all three quarters of 2020 it's released financials for so far. The company's first-, second-, and third-quarter comparable sales increased 10.8%, 24.3%, and 20.7% from the year-ago periods. Target's digital comparable sales also surged by 141%, 195%, and 155%, respectively, during these quarters.
The company continues to leverage its strong cash position to satisfy its dividend obligation to investors and pay down existing debt. In the third quarter alone, the company disbursed $340 million in shareholder dividends and used $2.3 billion to whittle down its outstanding liabilities. Whether your retirement is around the corner or several years off, Target is a fantastic stock to buy to generate long-term returns for your portfolio and provide a supplementary source of income you can save or reinvest.
3. Lowe's
Well-known home improvement retailer Lowe's (LOW 1.07%) has soared to an all-time high since the pandemic began, with shares up 35% from one year ago. The company pays a dividend that yields about 1.5% and is also a venerable member of the Dividend King club.
Lowe's was a solid buy before the pandemic started, drawing in value investors with its modest but consistent growth and products that are always in demand. In 2018, the company grew its net sales by 4% year over year, while net sales rose by 1% in 2019.
Since the start of the pandemic, multiple waves of lockdowns and repeat closures of retailers deemed non-essential have driven consumers to essential retailers and to shop online. Not only have Lowe's store locations stayed open the whole time, but the products it sells cater directly to the mass of consumers taking up home improvement projects to pass the time during quarantine.
Accordingly, Lowe's has reported record sales increases both in-store and online throughout the pandemic. The company's comparable sales went up 12.3%, 35.1%, and 30.4% during the first, second, and third quarters from the same periods in 2019. Sales on Lowes.com have also boomed as the result of shifting consumer shopping behaviors, with second- and third-quarter digital sales growing 135% and 106% from the year-ago periods.
Lowe's likely won't maintain its 2020 growth streak indefinitely, but that doesn't mean that investors can't find plenty of upside potential in this stock. In fact, analysts think it can grow its earnings by more than 20% each year in the upcoming five-year period. And after increasing its dividend for nearly 60 years in a row, it's tough to beat Lowe's track record. For investors seeking consistent, reliable dividend income, that's worth its weight in gold.
