The stock market is down 14% so far this year. Investors' concerns about inflation, rising interest rates, and geopolitical situations, among other factors, have made the market slump. But fear shouldn't make you completely ignore the stock market. History has proven a distressed market provides the right opportunity to invest.
If you are an investor looking to earn regular income even in a volatile market, dividend stocks are the way to go. A record of consistently paying and increasing dividends is a sign of a stable company -- implying regular income in the form of dividends. And I have just the right three in mind.
Image source: Getty Images.
1. Coca-Cola
Even though growth stocks got hammered this year, this beverage company held its ground. Coca-Cola's (KO 1.50%) profitable business model (thanks to its geographic diversity and marketing strategies) allowed it to provide a good return to shareholders. Total revenue jumped 16% year over year in the first quarter to $10.5 billion while adjusted earnings were also up 16% to $0.64 per share. Strong top-line growth drove the operating margin to 32.5% vs. 30.2% in the prior-year quarter.
A key advantage Coca-Cola holds is its pricing power, which should keep it safe even during inflation. The company can pass on its raw material prices to consumers to keep its profit margins growing. Despite the suspension of its business in Russia driven by the Russia-Ukraine conflict, it still expects organic revenue growth in the range of 7% to 8% for the full year. Adjusted earnings per share could show a surge of around 5% to 6%.
Coca-Cola also expects an adjusted free cash flow of around $10.5 billion for the year. The strength of its business is an assurance that dividend payments aren't halting any time soon. In fact, for this year Coca-Cola announced a 5% quarterly dividend hike to $0.42 per share, marking its 60th dividend increase.
2. Johnson & Johnson
Johnson & Johnson's (JNJ -0.69%) diversified operations -- which include consumer, medical devices, and healthcare segments -- have kept it robust over time. Recently, J&J decided to spin off the consumer segment into a new, publicly traded company. The intention is to focus more on its core healthcare business, which appears strong enough to drive revenue and profits for years to come.
The healthcare giant has been consistently paying and increasing dividends, demonstrating the focus it has on growing its business. Its exceptional first-quarter performance is proof of that point. The company hiked its quarterly dividend by 6.6% to $1.13 per share in the first quarter. Like Coca-Cola, this marks its 60th consecutive yearly dividend increase.
Johnson & Johnson's top line grew 5% to $23.4 billion while earnings per share rose 3% to $2.67 from the prior-year period. Amid the macroeconomic headwinds that J&J faced in the quarter, management believes it to be a strong performance. Its pharmaceutical segment, which boasts a solid drug portfolio, contributed most to total sales.
The company is also heavily investing in research and development expenses to introduce new products and drugs in the market.
An uncertainty of demand and supply made J&J suspend its guidance for COVID-19 vaccine sales for the full year. Thus, total reported sales could now be in the range of $94.8 billion to $95.8 billion, slightly below the previous guidance. Adjusted earnings per share could also be in the range of $10.15 to $10.35 instead of $10.40 to $10.60, as estimated earlier.
But headwinds of any kind have never impacted the payment of J&J's dividends, which is why I believe it is a safe dividend pick for long-term investors.
Image source: Getty Images.
3. Medtronic
Medtronic (MDT -1.12%) is a big name in the medical devices industry, operating under four segments: cardiovascular, medical-surgical, neuroscience, and diabetes. Based in Ireland, the company operates across 150 countries, treating close to 70 health conditions.
The stability of its business has allowed Medtronic to pay timely dividends to its shareholders. Its recent fourth-quarter results are a testimony to that point. In the quarter ended April 29, revenue totaled $8.1 billion, marking a year-over-year organic growth rate of 1%. Meanwhile, adjusted net profits came in at $1.4 billion compared to $1.3 billion in the year-ago quarter. Most of its segments saw gains except for diabetes (down 4.8%) and medical-surgical (off 1.2%).
Looking forward to fiscal 2023, the company expects to face inflation, supply-chain issues, and other headwinds, but it has high growth prospects in the medical device segment.
Medtronic's performance allowed it to hike the annual dividend by 8% to $2.72 per share, marking the 45th consecutive year of dividend increases. Management said the company remains committed to returning 50% of its free cash flow to shareholders.
The perfect fit for any portfolio
All three companies yield more than 2.5%, higher than the S&P 500's average yield of 2%. But yield is not what you look at when choosing dividend stocks. Consistency in dividend payments is the key criterion.
Johnson & Johnson and Coca-Cola aren't just any dividend stocks. They have each earned the title of Dividend King, meaning they have increased dividends for at least 50 consecutive years, proving how well they handle their businesses amid the market's highs and lows. Dividend Kings are good for investors with a retirement portfolio as these companies are mature businesses with less room to grow.
Medtronic, on the other hand, is a rising star in the medical devices segment, especially now that it is expanding into robotic surgery -- a burgeoning market. It is a Dividend Aristocrat, a company that has paid dividends for at least 25 consecutive years -- or 45 years in Medtronic's case.
