This has been an especially challenging year for investors of all stripes. The benchmark S&P 500 index has fallen 19% from the peak it set in January. The Nasdaq Composite, which contains more high-growth tech stocks than the S&P 500, has tumbled by 28% since hitting a high-water mark late last year.
Bear markets have a strong psychological effect on stock prices across the board. In times like these, stocks that represent strong underlying businesses can come under pressure, too.
Both of these dividend-paying healthcare stocks are ideal purchases for investors nervous about further market swings in the wrong direction. With these companies' firm commitments to deliver a portion of profits to shareholders, investors can keep collecting their dividends regardless of what happens to the stock price.
1. Abbott Laboratories
Well-diversified revenue streams make Abbott Laboratories (ABT 1.80%) an ideal stock for long-term investors. At recent prices, it offers a 1.7% yield that could rise by leaps and bounds in the years ahead.
The company's nutrition segment has been grabbing headlines from a nationwide baby formula shortage caused by the abrupt closure of just one of the company's factories. While this is disturbing to consumers, the shortage illustrates Abbott's strong competitive advantages in this niche industry.
NYSE: ABT
Key Data Points
In early 2020, Abbott's diagnostics segment was one of the first to launch COVID-19 tests. As a result, diagnostics sales shot up 32% year over year to $5.3 billion in the first quarter.
It's been nearly a century since Abbott missed a quarterly dividend payment. Since 1972, the company hasn't gone a year without raising the payout at least once.
Receding demand for COVID testing is a challenge to overcome, but another important revenue stream is poised to pick up the slack. In May, the Food and Drug Administration cleared the Freestyle Libre 3, the company's next-generation continuous glucose monitor, for people with diabetes.
2. Johnson & Johnson
Johnson & Johnson (JNJ +0.46%) is another well-diversified healthcare conglomerate with a legendary dividend program. At recent prices, the stock offers a 2.5% yield that could continue rising steadily for many more years.
Johnson & Johnson still markets the consumer healthcare goods that made it a household name, but not for much longer. In 2023, the consumer goods segment will spin off into a separately traded company, so investors who buy the stock now will technically get a two-for-one deal.
NYSE: JNJ
Key Data Points
With products that many of us literally cannot live without, cash flows from the company's remaining medical devices and pharmaceutical segments could be reliable sources of growth in the years ahead. Adjusted for the rising strength of the U.S. dollar, first-quarter medical device sales rose 8.5% year over year while pharmaceutical sales surged 9.3% higher.
Pharma sales will get a boost from the recent approval of Cabenuva as a long-term HIV treatment to be injected once every two months. In March, J&J's medical device segment added two new knee-replacement products that use 3D printing to allow patients a more active lifestyle.
In April, J&J raised its dividend payout for the 60th year in a row. The 6.6% increase on its own might seem insignificant, but over time a bunch of bumps in the mid-single-digit percentages really add up. The dividend payment has risen 371% over the past 20 years.
Over the past 12 months, J&J used 37% of the free cash flow generated by operations to pay its dividend. That gives the company plenty of room to increase its payout in line with earnings growth. The upcoming spinoff makes predicting growth more challenging than usual, but J&J shareholders can reasonably expect increasing levels of passive income from this stock all the way through their retirement years.
