Dividend stocks can be an investor's best friend in both up and down markets. However, not all dividend stocks are created equal. When selecting dividend stocks to add to your portfolio, it's important to choose companies with a track record of both maintaining and raising their dividends in a variety of economic scenarios.
It's also important to look beyond the dividend and at the underlying business to determine whether it aligns with your investment preferences and the risk levels you've set for yourself. If you're hunting for great income stocks to add to your buy basket in the current volatile market, here are three to consider right now.
1. Eli Lilly
Eli Lilly (LLY -0.64%) pays a dividend that yields 1.1% based on current share prices. Over the trailing decade, the company's dividend has risen by a steady clip of approximately 130%. Eli Lilly is one of the largest pharmaceutical companies in the world, which has lent a durable measure of stability and growth to its underlying business throughout many economic cycles.
The company's portfolio of products targets a wide range of health concerns, from cancer to diabetes to rheumatoid arthritis. Over the trailing decade, Eli Lilly has seen annual revenue and profits rise in the amount of 23% and 33%, respectively. This isn't a lightning-growth business, but a mature company with a steadily expanding portfolio of profitable, established products. Even so, in that same 10-year period, the stock delivered a total return of more than 711% to long-term shareholders.
The final quarter of 2022 saw Eli Lilly's revenue drop 9% from the year-ago period to $7.3 billion. However, this was largely due to a decline in COVID-19-related product sales. Excluding these items, revenue in the final quarter actually rose 10% year over year on a constant-currency basis. Meanwhile, net income totaled $1.9 billion for the last quarter of the year, up 12% year over year, even with foreign currency weaknesses still factored in.
Management noted that 10 of the company's top-selling drugs -- which includes its metastatic breast cancer drug Verzenio and type 2 diabetes drugs Mounjaro and Jardiance -- generated 70% of the company's revenue in the fourth quarter of 2022, with revenue from these 10 products alone rising by 21% on a year-over-year basis.
In addition to its existing portfolio, Eli Lilly boasts a robust pipeline. Management is planning to carry out as many as four new product launches in 2023, including the company's long-awaited prospective blockbuster Alzheimer's drug donanemab, which is awaiting regulatory review.
Taking these factors into account, this income stock may be too good to pass up.
2. Johnson & Johnson
Johnson & Johnson (JNJ 0.67%) is another dividend veteran. The company has not only paid out but raised its dividend every year for 60 years in a row and counting. Currently, the stock yields approximately 2.1%. That dividend has also risen by about 85% in the trailing decade alone, while the stock has delivered a total return of 181% in that same time frame.
Johnson & Johnson generated $95 billion in total sales in 2022, up 1.3% from 2021, along with net earnings of $18 billion. While macro conditions and unfavorable foreign-currency headwinds impacted these metrics, on an operational basis, total sales rose 6% in 2022, stemming from respective operational sales increases of 4%, 6%, and 7% in its consumer health, medical device, and pharmaceutical segments, respectively.
When the company spins off its consumer health business from its pharmaceutical and medical device segments later this year, both companies will remain publicly traded and pay dividends. The new consumer health business will be called Kenvue.
While Kenvue will undoubtedly adhere to a different growth story than the combined pharmaceutical and medical device businesses, the company's long-standing leadership in each of these spaces can contribute to steady returns on the balance sheet and for shareholders over the long run.
3. Target
Target (TGT 1.28%) also makes the cut as a long-standing dividend payer, with 51 years of consecutive dividend increases under its belt to date. The stock yields 1.8% for investors, and the past decade has seen Target's dividend rise to the tune of 200%, while the stock has generated a total return of 261%. Management just announced Target's first-quarter dividend of $1.08 per share, the company's 222nd consecutive quarterly dividend since entering the public markets in the late 1960s.
Target faced a tough operating environment over the last several quarters. While the company's diverse business model means that it is exposed to both discretionary and nondiscretionary sources of consumer spending, supply chain constraints, the impact of inflation, fluctuating consumer habits, and an excess of inventory that it's been working off its balance sheet (and been forced to heavily discount in some cases) have all impacted the top and bottom lines.
However, Target's leadership as a premier retailer, combined with its robust and expanding online presence, can help it to recover as economic conditions improve. The third quarter of 2022 saw comparable sales rise 2.7% from the year-ago period, while overall revenue rose 3.4%.
However, comparing Target's total third-quarter revenue of $27 billion to the same quarter in 2019, its top line rose more than 40% on a three-year clip. Net income was down year over year in the third quarter of 2022, but Target still recorded profits in the amount of $712 million. For investors with a well-diversified portfolio and a lengthy investment horizon, the retailer's robust dividend and long-term potential could necessitate a second look.
