The Dow Jones Industrial Average consists of 30 of the most established businesses in the world. Thus, it shouldn't be a surprise to learn that many of the components that belong to this index have decades of dividend growth to their credit.
Regardless of what's going on in the stock market, there are arguably always intelligent moves to make with your capital allocation. Here are two Dow Jones stocks with more than a century of dividend growth between them to consider buying this month.
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1. Johnson & Johnson: The most impressive dividend growth streak in healthcare
With over 150,000 employees around the world, Johnson & Johnson (JNJ 0.05%) is the second-largest pharmaceutical company on the planet. For years, the company was the biggest drugmaker in the world. But a combination of a surge in Eli Lilly's stock and the recent spinoff of J&J's consumer health business Kenvue helped to propel Lilly into the top spot.
J&J's robust product portfolio is what supports its $401 billion market capitalization. What exactly is so special about the company's product lineup? Well, the company has 14 products on track to top $1 billion in annual sales in 2023, including its COVID-19 vaccine and the immunology therapy Stelara.
J&J continues to be committed to research and development (R&D). This is evidenced by the fact that the company spent $3.6 billion on R&D in the first quarter of this year alone to fund more than 100 clinical trials currently in progress. Analysts expect that these factors could lead to mid-single-digit annual earnings growth over the next five years.
Coupled with a dividend payout ratio that is projected to be around 44% in 2023, this should allow the company to extend its 60-year dividend growth streak -- already the longest in all of healthcare. As a bonus, J&J's 3.1% dividend yield is well above the S&P 500 index's 1.6% yield.
Best of all, income investors can pick up shares of the stock at a forward price-to-earnings (P/E) ratio of 14. This is only slightly greater than the drug manufacturing industry average forward P/E ratio of 12.8, which is a reasonable premium for a stock of J&J's quality.
2. McDonald's: A thriving rewards program
Serving more than 60 million customers each day at 40,000-plus restaurant locations around the world, McDonald's (MCD -0.43%) is the leader of the fast-food-chain industry. The company's $208 billion market cap puts it at almost twice the size of its next-biggest competitor, Starbucks.
As big as McDonald's is as a company, it arguably has plenty of potential for growth left in the tank. This is because, since launching its MyMcDonald's rewards program in July 2021, it has grown to nearly 50 million 90-day active members in its top six markets as of March 31. It's worth noting that, since rewards customers tend to spend more often and spend more, on average, per transaction than non-rewards customers. For this reason, analysts believe that McDonald's earnings will compound by 8.4% annually through the next five years.
Growing profits alongside a dividend payout ratio that is poised to clock in at approximately 56% in 2023 should give the company the ability to keep its 47-year dividend growth streak going. Investors can scoop up shares of McDonald's and its 2.1% dividend yield at a forward P/E ratio of 23.5. For context, that is precisely in line with the restaurant industry average forward P/E ratio of 23.5.
