If you're a new investor building your basket of stocks from the ground up, diversification and a long-term mindset are key to constructing a stable portfolio of investments that can deliver consistent returns for many years to come. Filling your portfolio with high-quality companies that have stood the test of time and continue to make investors richer -- in a variety of market situations -- is one way to accomplish this goal.
If you're a new investor trying to build a winning portfolio in the current market environment, you've come to the right place. Today we're going to take a look at two stocks that have continued to generate stable returns for shareholders throughout the pandemic, and are the kind of rock-solid investments that you can buy and hold for a lifetime.
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1. Johnson & Johnson
Johnson & Johnson (JNJ 0.82%) has grabbed the attention of many investors over the past year because of its coronavirus vaccine, but the 135-year-old company has much more to offer shareholders than any growth it might experience from this single product. In fact, the company has yet to turn a profit from its one-dose vaccine -- which was developed by its subsidiary Janssen Pharmaceuticals -- and has committed to continue producing doses on a not-for-profit basis for the duration of the pandemic. So while Johnson & Johnson may see some future balance-sheet gains from its vaccine, the company's role in the coronavirus vaccine race isn't a reason to buy this stock.
However, there are plenty of other compelling reasons for investors of all trading styles and strategies to scoop up shares of this blue-chip stock right now. First, there's the company's core business model, which centers around three key business segments to generate revenue. The pharmaceutical division features a broad array of lucrative products, including blockbuster drugs like Stelara (for psoriasis) and Darzalex (a cancer treatment), as well as other top-selling medicines like Imbruvica (also for cancer) and Tremfya (also for psoriasis). Johnson & Johnson also boasts a thriving consumer health business segment, bolstered by household-name brands like Neutrogena, Listerine, Aveeno, Tylenol, Benadryl, and Motrin. The third source of Johnson & Johnson's revenue comes from its wide range of medical devices, which include everything from hip and knee replacements to surgical instruments.
Johnson & Johnson's balance sheet suffered in the earlier stages of the pandemic, but it closed 2020 out on an optimistic note. Its fourth-quarter sales grew 8.3% from the year-ago period, and its full-year sales increased 1.2% on an operational basis. While a drop in surgical procedures last year resulted in a near-term impact on Johnson & Johnson's medical device segment, sales derived from its consumer health and pharmaceutical segments rose by 3.1% and 8.4%, respectively, during the 12-month period.
Johnson & Johnson is already proving its ability to rebound quickly from pandemic headwinds. The company reported nearly 8% sales growth in the first quarter of 2021, and earnings per share (EPS) rose by a healthy 7%. And while its consumer health segment saw a slight decline in sales during the three-month period, its pharmaceutical segment sales rose 7.4%, and sales from its medical device segment increased 8.8% year-over-year. On the heels of a strong first quarter, management raised its full-year guidance, and is projecting more than 9% adjusted operational sales growth for 2021.
Finally, investors should also take a good look at Johnson & Johnson's robust dividend, which yields 2.5% based on current share prices. Management just announced a 5% increase to its quarterly payout on April 20. In fact, the company has such a stellar history of increasing its dividend over time (nearly 60 consecutive years) that it's part of an elite club of stocks known as Dividend Kings.
Johnson & Johnson's pattern of gradual, stable growth and robust investor returns in the form of consistent dividend increases make this stock an unbeatable buy in both bull and bear markets.
2. Procter & Gamble
Another company for new investors to consider is a classic pick from the world of consumer staples stocks. Procter & Gamble (PG 1.52%) has been in business for 184 years. Its family of brands includes Pampers, Bounce, Tide, Bounty, Charmin, Old Spice, Pantene, Dawn, Swiffer, Crest, and Vicks, to name a few.
Like our previous stock pick, Procter & Gamble is also one of a handful of companies that has made it to the Dividend King list. The company has increased its dividend payout every year for more than six decades, and its dividend yields 2.5% at the time of this writing.
Besides its illustrious dividend track record, Procter & Gamble's stable of household-name brands has stimulated solid balance-sheet growth throughout the pandemic. The company marks its fiscal year a bit differently than other stocks -- its fiscal 2020 ended on June 30. During that 12-month stretch, Procter & Gamble reported 5% net sales growth, and earnings per share rose by a robust 13%.
The company has continued to report consistent growth figures throughout its fiscal 2021. During the first three quarters of this fiscal period (which ended Sept. 30, Dec. 31, and March 31), Procter & Gamble reported year-over-year net sales increases of 9%, 8%, and 5%, respectively. Moreover, except for a slight third-quarter sales decline in Procter & Gamble's baby, feminine, and family care segment, all of the company's core business segments marked sales increases in each of the first three quarters of fiscal 2021.
The company is also continuing to generate significant cash flow while faithfully fulfilling its dividend obligation to shareholders. It reported more than $4 billion in operating cash flow in the third quarter alone, and paid out $5 billion in shareholder dividends during that three-month period. Procter & Gamble is also targeting between 5% and 6% sales growth for its full-year fiscal 2021.
If you're searching for a safe stock that can help you weather whatever market storm might be around the corner while helping you build a more resilient portfolio and increasing your nest egg at the same time, Procter & Gamble is the kind of stock to buy and hold for decades to come.
