This year has been particularly difficult for the stock market, making investors more hesitant to invest their hard-earned money. Dividend stocks, on the other hand, are popular among investors because these investments are typically stable and secure. Such investments are also a simple way to earn consistent income even in a volatile market.
And what's better than companies with a history of consistently paying and increasing dividends? Dividend Kings are companies that have increased their dividends for 50 years in a row -- and I've got the perfect three in mind.
Image source: Getty Images.
1. AbbVie
Biopharma company AbbVie's (ABBV 0.25%) shares have jumped 18% so far this year, compared to the broader market's drop of roughly 17%. Though investors are concerned about it losing its U.S. patent exclusivity for Humira, its star product, next year, the company has a slew of other successful drugs. In adults, Humira is used to treat moderate to severe rheumatoid arthritis. Last year, it generated $21 billion in annual sales, accounting for 37% of AbbVie's total revenue.
Skyrizi (used to treat moderate to severe plaque psoriasis in adults) and Rinvoq (used to treat moderate to severely active rheumatoid arthritis in adults) are two of the company's most promising drugs now.
In the third-quarter earnings call, CEO Rick Gonzalez made a bold prediction, stating:
Skyrizi and Rinvoq have established outstanding launch trajectories across existing and new indications, giving us a high degree of confidence in the collective potential of these two assets to ultimately exceed the peak revenues achieved by Humira, achieving the strategic objective we had for replacing Humira.
In Q3, Skyrizi and Rinvoq together brought in nearly $2.1 billion in sales, while Humira generated $5.5 billion.
AbbVie has earned the prestigious title of Dividend King by raising dividends for 50 years in a row. Since its inception and separation from Abbott Laboratories in 2013, its payouts have increased by more than 250%.
AbbVie has a robust pipeline of successful drugs and will continue to develop new ones. The company is investing heavily in research and development (R&D), which totaled $1.6 billion (11% of revenue) in Q3. This should reassure investors that dividend payments will not be discontinued any time soon. It's not only an income stock -- it's also a growth stock that has the potential to reward investors handsomely in the long run.
2. Johnson & Johnson
Johnson & Johnson (JNJ 0.67%) is a popular name in the consumer and healthcare sectors. It has captured the market with well-known brands such as Listerine, Neutrogena, and Tylenol. The company is spinning off its consumer business to focus solely on its healthcare division. That is not a major concern for investors, because its pharma segment will more than suffice to keep the company running for many years. This segment contains some high-quality cancer drugs, such as Darzalex and Erleada.
Its pharmaceutical segment contributed the most to total sales in Q3. Its revenue increased 2% year over year to $23.8 billion, while adjusted earnings per share fell 1.9% to $2.55 (impacted by the consumer health separation-related tax).
It also continues to invest heavily in R&D, which totaled $3.6 billion in Q3. In addition, the company is working to strengthen its MedTech (medical technology) segment. It recently announced its intention to acquire medical device company Abiomed, which could boost its MedTech revenue in the coming years.
Johnson & Johnson has a dividend yield of 2.5%. The company increased its quarterly dividend by 6.6% in the first quarter to $1.13 per share, which marked its 60th consecutive dividend hike. Market volatility hasn't affected its dividend payouts, which is why I believe it will continue to grow its revenue and profits while returning payments to shareholders.
3. Procter & Gamble
Procter & Gamble (PG 0.86%), the maker of brands such as Pampers, Tide, and Gillette, is well-known around the world. It has also earned the title of Dividend King due to its consistent dividend increases over the last 66 years, proving to investors how stable its business is despite market highs and lows.
In its recent fiscal Q1 (period ended Sept. 30), net sales increased 1% year over year to $21 billion, while diluted earnings per share fell 2% to $1.57. P&G generated 86% of its net earnings as free cash flow (free cash flow productivity), allowing it to pay out $2.3 billion in dividends.
Management anticipates some headwinds in fiscal 2023 as a result of rising raw material costs. Thus, the company now expects revenue to be down 1% to 3% from last year.
Its diverse business has kept it stable for years and may continue to do so in the future. Despite market headwinds, P&G expects to generate 90% free cash flow productivity this fiscal year, allowing it to pay close to $9 billion in dividends and repurchase $6 billion to $8 billion of common stock.
The company increased its quarterly dividend by 5% year over year to $0.91 per share in April. With a current dividend yield of 2.5%, P&G is a good way to earn some passive income.
JNJ Dividend Yield data by YCharts
Why these are safe stocks
All three stocks pay out significantly more than the S&P 500's current average dividend yield of 1.6%. When selecting dividend stocks, however, yield is not the only factor to consider. Investors should consider consistency in dividend payments. Earning the title of Dividend King also ensures that investors will have access to consistent income regardless of economic cycles.
