Bear markets are excellent opportunities to invest in dividend stocks, and it's obvious why. As panicked investors sell off their shares of money-printing businesses in favor of sitting on the sidelines, fat yields await those with the confidence to be buying -- and that could be you.
In particular, there are two strong passive income stocks you should consider buying before prices start to rise again. A smart move now could set you up with an income stream for decades to come, so check these two companies out.
1. Walgreens Boots Alliance
As one of the biggest national pharmacy chains in the U.S., Walgreens Boots Alliance (WBA -1.18%) is also an appealing stock to invest in before a new bull market occurs. This year's bear market hasn't been great for the pharmacy retailer's stock with its shares falling 23%, more than the wider market's drop of around 19%. But the dip is an attractive opportunity for investors looking for passive income as it's highly unlikely that demand for local pharmacies is going to decline dramatically anytime soon.
Furthermore, management is banking on Walgreens' new foray into providing primary care and post-acute care services at its VillageMD and Carecentrix locations to drive growth over the coming years. In the 2022 fiscal year, healthcare services brought in $1.8 billion in revenue out of $132.7 billion for the entire company. But by the end of the 2025 fiscal year, it could report as much as $16 billion in healthcare sales, not to mention around $1 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA).
Longer-term, that means the segment could be key for providing the earnings to support Walgreens' dividend. At the moment, its forward dividend yield is a hair shy of 5%, which is on the meaty side. Therefore, if you invest $5,000, you'll get annual passive income of about $249 -- and this could increase over time provided that management sees fit to keep hiking the dividend.
In the past five years, Walgreens only grew its dividend by 20%, so you'll have to wait a good while before your income stream becomes a more formidable size. On the bright side, its payout ratio is only around 38%, so the dividend you get will probably be fairly safe even if the company's earnings don't rise by very much over time.
2. Johnson & Johnson
Johnson & Johnson (JNJ -1.15%) is one of the safest stocks out there, and it's no surprise why. The business owns a massive number of brands you probably use, including over-the-counter medicines like Zyrtec and Motrin, not to mention its portfolio of prescription pharmaceuticals and medical devices. In Q3 alone, it sold $23.8 billion worth of its products, $13.2 billion of which stemmed from global sales of its prescription drugs.
By 2025, management aims to grow its prescription sales to reach a total of at least $60 billion per year. That's key as the company plans to spin off its consumer health division before November 2023, which should make it leaner and potentially faster-growing. Investors who buy the stock before then will be entitled to shares of the new entity as well as the new Johnson & Johnson, so they'll get two slightly different passive income streams, too.
Right now, the stocks forward dividend yield is presently a bit above 2.5%, which means that your investment of $5,000 would generate $127 in dividends in the first year. Johnson & Johnson's payout rose by 34.5% over the last five years, and investors can count on their income stream from this stock to be rock solid. After all, the company is a Dividend King with more than 60 years of consecutive dividend increases, and management won't want to break that streak if there's anything to be done about it.
