The one thing that's certain in the stock market is uncertainty. While great, financially sound companies inevitably perform well in the long run, their performance in the short term can be volatile and reliant on many factors -- some of which are outside of their control.
If you're a long-term investor, the day-to-day fluctuations in stock prices shouldn't faze you, but there are ways to still make money, even during bear markets. One way is to own dividend stocks. And while many companies pay out dividends, only a select few raise their dividends annually. The ones in the S&P 500 that can consistently increase their annual dividend payout for at least 25 consecutive years get the rare designation as Dividend Aristocrats.
Let's take a closer look at three of these Dividend Aristocrats that would make good buys during a bear market.
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1. 3M: 63 years of annual dividend increases
3M (MMM +1.38%) is a conglomerate that operates in worker safety, consumer goods, transportation, and healthcare sectors and played a sizable role in the fight against the COVID-19 pandemic. The company has a strong portfolio, and 2021 proved to be a lucrative year for the company, bringing in $35.4 billion in sales, up 9.9% from 2020. That organic sales growth was consistent across multiple segments of the company:
- Safety and industrial: $12.9 billion (up 7.8%).
- Transportation and electronics: $9.8 billion (up 9%).
- Healthcare: $9.1 billion (up 8.6%).
- Consumer goods: $5.9 billion (up 17%).
Key Data Points
While 3M's stock performance has been underwhelming for the past five years (down over 21.3%) because it is dealing with some long-term litigation issues, the company has paid dividends to its shareholders uninterrupted for more than 100 years and has increased the dividend annually for 63 consecutive years (which earns it the even more rare designation as a Dividend King). That shows the company is able to reward investors with ever-growing payouts whether the broader economy is doing well or in recession. In just 2021 alone, the company returned $3.4 billion in dividends at a 3.95% yield.
Couple the impressive track record of dividend payouts with its $2 billion investment in research and development in 2021, and there's little reason to believe that the company plans to stop lucratively rewarding investors anytime soon.
2. Coca-Cola: 59 years of annual dividend increases
As the world's leading beverage company, Coca-Cola (NYSE: KO) has been one of the premier blue-chip stocks for quite some time now. In 2021, the beverage giant brought in $38.7 billion in revenue, up 17% from 2020. While that number is a bit skewed by comparisons to a tough COVID-19-impaired 2020, it's not all that far off as Coca-Cola has a solid track record of revenue growth. Not only did the company manage to have impressive revenue numbers, but its cash flow also increased by $2.8 billion to an impressive $12.6 billion. This suggests the company has the pricing power to help it combat rising production costs.
NYSE: KO
Key Data Points
For each of the past 59 years, Coca-Cola has increased its yearly dividend, with the company returning $7.3 billion to investors in 2021 ($1.76 per share). With a 2.84% yield, the payout is well above the S&P average (1.3%). And that high yield is present despite the fact that the stock is trading at levels not seen since just before the pandemic hit. The stock price is up over 18% in the past year and nearly 47% over the past five years.
Even if the stock's price doesn't increase at these same rates, investors can feel comfortable knowing their dividend payments will be reliable and remain throughout any bear market.
3. Johnson & Johnson: 59 years of annual dividend increases
Pharmaceutical giant Johnson & Johnson (JNJ 0.14%) has been around for over 130 years and has built up a sizeable product portfolio with billion-dollar brands in consumer health, MedTech, and pharmaceuticals. It was one of three companies to have a COVID-19 vaccine approved for use and earned $2.4 billion from it in 2021. In 2021, Johnson & Johnson brought in $93.8 billion in revenue (up 13.6%), with $24.8 billion (up 10.4%) coming in the fourth quarter alone.
NYSE: JNJ
Key Data Points
Johnson & Johnson's dividend yields 2.39% and it has earned its spot as a Dividend Aristocrat by increasing dividend payouts each of the last 59 years. It currently pays out $1.06 per share per quarter.
As we potentially near a bear market and continue to navigate the COVID-19 pandemic, Johnson & Johnson has positioned itself as a lucrative investment because of its ability to generate consistent revenue growth and bottom-line profits in all sorts of economic conditions. Its business model rewards investors for their ability to buy and hold. Regardless of what happens with the company's stock price, you can count on your quarterly dividend.
