A distressed market can be a scary place to invest your hard-earned money. But history has proven that these markets offer good stocks at bargain prices. Generally, companies that consistently pay and hike dividends are stable and safe stocks, so investors looking to earn some regular income in a volatile market should consider solid dividend stocks.
I have three such companies in mind. They have all earned the title of Dividend Kings by increasing dividends for at least 50 consecutive years, showing how well they handle their businesses amid the market's highs and lows. Let's dive in.
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1. Procter & Gamble
Known for its brands like Pampers, Tide, and Gillette, Procter & Gamble (PG -0.03%) is a popular consumer-staples stock. Its consistent dividend hikes for 66 years are a sign of how secure the company is amid market highs and lows.
For fiscal 2022, the company's net revenue increased 5% year over year to $80 billion, while earnings jumped 3% to $5.81 per share from the prior-year period. All of its segments grew in the year. The company generated 93% of net earnings as free cash flow, which allowed it to pay $8.8 billion in dividend payments.
No matter the market situation now, P&G expects fiscal 2023 to be a steady year. Revenue could be in line with fiscal 2022 revenue or up 2%, and earnings per share (EPS) could be in line with fiscal 2022 EPS or up 4%.
P&G's diversified business of consumer staples and healthcare products allows it to stay balanced in a volatile market. In April, it increased its quarterly dividend by 5% year over year to $0.91 per share. With a current dividend yield of 2.5%, P&G is a good bet for income-seeking investors.
2. Johnson & Johnson
Another well-liked name in the consumer and healthcare sector is Johnson & Johnson (JNJ -1.15%). Some of its well-known brands include Listerine, Neutrogena, and Tylenol.
The company is spinning off its consumer segment to focus on its core healthcare business. Its pharma segment boasts some quality products, such as cancer drugs Darzalex and Erleada, and has more that are sufficient to keep it growing for years to come. To introduce new medications to the market, J&J continues to invest heavily in research and development. It spent $3.7 billion on R&D in the second quarter.
J&J's exceptional second-quarter performance shows the success of that strategy. The top line grew 3% to $24 billion from the prior-year period, while adjusted earnings per share rose 4.4% to $2.59. Amid the macroeconomic challenges that J&J faced in the quarter, management believes the company continues to be resilient. Its pharmaceutical segment contributed the most to total sales.
J&J altered its guidance for the full year. Total reported sales could now be in the range of $93.3 billion to $94.3 billion, slightly below the previous guidance. Adjusted earnings per share could be in the range of $10 to $10.10 instead of $10.15 to $10.35, as estimated earlier.
The good news is that the company hiked its quarterly dividend by 6.6% to $1.13 per share in the first quarter, which marked its 60th consecutive yearly dividend increase. J&J now has a dividend yield of 2.7%. No market volatility has ever impacted J&J's dividend payments, which is why I believe it's a safe dividend pick for long-term investors.
3. The 3M Company
3M Company (MMM -0.66%) has a diversified business model that consists of consumer, safety and industrial, transportation, healthcare, and electronics businesses. This diversity has kept it steady and allowed it to hike its dividends consistently for 64 years. It is currently in the process of spinning off its healthcare division as a separate entity by 2023.
But that shouldn't worry investors as the idea behind the move is to reduce debt and create more value for shareholders. No doubt, there are short-term risks: It could take a while for the spun-off healthcare company to achieve financial stability and the new 3M to get its momentum back. But healthcare is now one of the fastest-growing sector and one with high demand. .
The other headwinds 3M is facing -- product-liability and environmental lawsuits -- will also wane eventually.
Macroeconomic uncertainties in Q2 led to a decline in adjusted free cash flow of 41% compared to the prior-year quarter but it still generated $1 billion of the same in Q2. 3M could use this free cash flow to fuel further growth strategies or pay dividends. 3M expects these headwinds to weigh on full-year results. Thus, adjusted earnings per share now could be in the range of $10.30 to $10.80, slightly below the prior estimate.
3M might have to work harder to maintain its hard-earned stature as a Dividend King. That said, these short-term headwinds and the dip in share price create an excellent opportunity for long-term investors to buy this evergreen dividend stock with a current yield of 4%.
JNJ Dividend Yield data by YCharts.
Safe dividend choices
All three stocks yield much more than the S&P 500's average current dividend yield of 1.5%. But when choosing dividend stocks, yield is not the only criterion. Consistency in dividend payments is what investors should look for too. And earning the Dividend King title is a pretty good assurance that investors will have access to regular income, despite the cycles of the market.
