A shaky stock market can discourage investors. That's when it could be a good time to consider dividend stocks. These can act as a safe haven, providing investors with consistent income despite market volatility.
Two that I'm thinking of now are long-standing players in their respective industries. Yet, they still have room to grow. The healthcare industry is rapidly expanding, which should allow both of these companies to thrive for many years to come, resulting in regular passive income for investors.
Let's dive in and take a look at both of them.
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1. Johnson & Johnson
Johnson & Johnson (JNJ -0.43%) is a well-known brand in the pharmaceutical and consumer goods market. With its diverse business that includes pharma, med tech, and consumer segments, the company has a large presence. However, by the end of this year, it will spin off its consumer segment into a new company called Kenvue.
The primary goal of this spinoff is to focus more on its pharmaceutical business, which generates the most revenue. There are some high-performing immunology and cancer drugs in this segment. Its two immunology drugs, Stelara and Tremfya, saw double-digit growth in sales last year, totaling $12.3 billion.
Darzalex, an oncology drug that treats multiple myeloma, saw sales jump 32% to $8 billion, and Erleada, a prostate cancer drug, also saw a 45.7% increase to $1.9 billion in 2022. In 2022, the pharma segment generated $52.5 billion in revenue.
Many other upcoming drugs in the company's pipeline could drive growth in the coming years. It spent $14.6 billion last year on research and development.
Johnson & Johnson's growing, stable business has resulted in annual dividend increases for 60 consecutive years, earning it the title of Dividend King. It has a payout ratio of 41% and a dividend yield of 2.8%, which is significantly higher than the S&P 500's average yield of 1.7%. Its consistent cash flow is sufficient to cover the payouts.
J&J has a track record of staying afloat in distressed markets. Its consistent dividend payouts, even during turbulent times, make it a good long-term investment.
2. Medtronic
Medtronic (MDT 0.95%) has made a name for itself among dividend-paying stocks by increasing its payout for 45 consecutive years. Consistent dividend increases imply that the company has upheld its business stability for many years.
Yet, the stock currently has a yield of 3.24%, much higher than the market. The company's recent third-quarter results may have made investors wary. Total revenue in the third quarter of fiscal 2023 (ended Jan. 27) was $7.7 billion, the same as in the previous year.
Year over year, adjusted earnings per share fell 4% to $1.30. Management attributed the decline to external macroeconomic headwinds. However, the company anticipates that revenue growth will remain stable in the coming quarters as short-term headwinds subside.
Medtronic ended the quarter with $2.5 billion in free cash flow, which should cover its dividend payments and growth strategies for the rest of the year.
Growth stocks are susceptible to short-term headwinds. What matters is the long-term outlook. Medtronic has a lot of scope to expand in the medical device industry. Experts predict that this market will grow at a compound annual rate of 5.5% between 2022 and 2029, reaching $719 billion.
The company has also entered the burgeoning robotic surgery market. The Hugo RAS system, its robotic-assisted device, is now approved for use in international markets, and management says it is gaining positive sales momentum. In December, the device was also used for the first robotic-assisted urological procedure in the United States.
Medtronic is an intriguing healthcare stock owing to its diverse product portfolio and consistent dividend payouts.
