Although bulls were hopeful that the central bank would nix the idea of further rate hikes later this year, the decision of OPEC+ to rein in oil supplies this summer may force the Federal Reserve's hand. This situation doesn't bode well for the near-term economic outlook in the United States.
This unfavorable setup shouldn't necessarily instill fear in stock investors. There are a fair amount of equities that can shrug off these macro headwinds to deliver respectable returns on capital in 2023 and beyond.
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Top-shelf dividend stocks, for instance, ought to outperform in a bearish market. Here are two elite dividend stocks that can thrive even in a protracted bear market.
1. Johnson & Johnson
Johnson & Johnson (JNJ +1.11%) has a remarkable track record of producing market-beating returns on capital for shareholders. The company's success can be directly attributed to its AAA rated balance sheet, prudent capital allocation, 60-year history of consecutive dividend increases, and enormous investment in research and development, which has led to a steady flow of new blockbuster level products.
In more recent times, however, the diversified healthcare giant has failed to live up to its high standards in terms of beating the broader markets. Key patent expiries in pharmaceuticals, a slowdown in medtech, anemic performance in consumer healthcare, and legal troubles have all weighed on J&J's shares since the start of 2018. At the onset of 2022, J&J appointed Joaquin Duato as its new CEO and tasked the industry veteran with changing the situation for the better.
NYSE: JNJ
Key Data Points
Under Duato's leadership, J&J has moved forward with plans to carve out its consumer healthcare business, acquired the top-shelf medical device company Abiomed, doubled down on developing a best-in-class multiple myeloma franchise, and set the wheels in motion to possibly end the litigation over its talcum powder. This plan ought to unlock significant value for shareholders in the years ahead, despite more trouble brewing in the form of additional patent expirations in pharmaceuticals.
Bottom line: J&J is poised to return to form as a market-beating investment vehicle as a result of its ongoing makeover under its newly minted CEO. Meanwhile, investors can collect the healthcare giant's above-average dividend yield of 2.88%, which is well funded by the company's enormous free cash flows.
2. Ford Motor Company
As a cyclical automaker, Ford Motor Company (F 2.04%) wouldn't normally be worth owning in an economic down period. But this is a highly unusual situation. Thanks to low inventory levels owing to supply chain constraints, chip shortages, and labor issues, automakers are widely expected to enjoy strong sales for the remainder of 2023, despite a bevy of macro headwinds. Put simply, there is a fair amount of pent-up demand for vehicles in the U.S. and abroad.
Ford, for its part, ought to benefit in a big way from this tailwind. After all, its market-leading F-series trucks are expected to dominate the full-size pickup truck category in terms of sales yet again in 2023. What's more, the legacy automaker's ongoing pivot to higher-margin vehicles should boost profit margin and free cash flow in the years ahead.
NYSE: F
Key Data Points
On the dividend front, Ford stock pays out an annualized yield of 4.83%, which is markedly higher than the average among S&P 500 listed equites. The automaker's sky-high dividend is also well supported by current operations, evinced by its meager trailing-12-month payout ratio of approximately 33%.
