The past 15 months have been disastrous for the major stock market indexes, but one has fared better than its peers. The Dow Jones Industrial Average has fallen around 12% since the end of 2021. That isn't anything to smile about, but it's heaps better than the Nasdaq Composite index, which is down 26% over the same time frame.
While traditionally filled with industrial and financial stocks, there aren't any specific rules that determine which companies become one of the Dow's 30 components. Generally, though, they've demonstrated an ability to reliably earn money in good economic times and bad.
A volatile stock market has made Dow Jones stocks more popular than usual, but there are still some good deals hiding in plain sight. Here's why these three look like smart buys for cautious investors.
Johnson & Johnson
One highly reliable Dow Jones stock to consider right now is healthcare conglomerate Johnson & Johnson (JNJ 0.67%). You're probably familiar with J&J's legendary consumer health brands, such as Listerine, Q-Tips, and Band-Aids, but don't let their popularity fool you into thinking this is just a big consumer health business.
In recent years, sales of medical technology and pharmaceuticals have been driving steady growth. To continue along a better trajectory, J&J plans to spin its consumer operation off as a separate company later this year. At recent prices, J&J shares offer a 2.9% yield, and investors will probably receive an equal or larger combined amount from two stocks instead of just one in 2024.
It's been 60 years since J&J went more than a year without raising its dividend payout at least once. This impressive track record was possible because healthcare expenses arise just as easily during economic downturns as they do during upswings.
Right now, Investors can buy shares of J&J for just 14.6 times forward-looking earnings expectations. That's lower than the average earnings multiple among stocks in the Dow Jones Industrial Average and S&P 500 indexes.
Amgen
Amgen (AMGN -0.50%) is a biotechnology company with some of the best-selling treatments on the planet. Strong profit margins from products that some of us literally can't live without has allowed the company to raise its dividend a whopping 353% over the past decade.
At recent prices, it offers a 3.7% dividend yield, so another decade at its previous pace could work wonders for your passive-income stream. More big dividend payout bumps in the near term should be a breeze. The company used less than half of the free cash flow it generated last year to meet its dividend commitment.
The U.S. economy may be headed for a recession, but you wouldn't know it by looking at Amgen's fourth-quarter results. Eight of the company's medicines grew volume by a double-digit percentage last year. That pushed total fourth-quarter revenue 10% higher year over year.
Last year's acquisition of Chemocentryx gave Amgen control of Tavenos, a new treatment for a rare cause of eyeball inflammation. A lack of competing treatment options could drive annual Tavenos sales north of $2 billion by 2030.
UnitedHealth
If the uncertain nature of drug sales makes you nervous, consider UnitedHealth Group (UNH 2.96%). This is the nation's largest manager of health insurance benefits, and it is also the country's largest employer of physicians who direct the flow of those benefits.
UnitedHealth Group collects monthly premiums from around 48 million Americans. In recent years, the company's Optum Health segment has snapped up health systems that provide the benefits it gets paid to manage.
UnitedHealth Group currently has around 70,000 physicians aligned or directly employed by its Optum Health segment, and profits are soaring. Earnings per share soared 17% year over year in 2022, and the company's raised its dividend payout 489% over the past decade.
The stock currently offers a 1.4% dividend yield. This might not seem like much now, but it's growing fast along with the company's bottom line. A steady trend toward vertical integration and endless demand for healthcare benefits could allow this stock to generate heaps of passive income by the time you're ready to retire.
