There are several reasons many investors gravitate toward dividend stocks. Some are attracted to the regular income stream, while others opt for dividend reinvestment to boost long-term returns. Whatever the case, it's crucial to pick the right dividend-paying companies, those that are unlikely to suspend or decrease their payouts regardless of economic circumstances.
There are many such corporations to choose from on the market. Let's consider two of them: Johnson & Johnson (JNJ -0.46%) and Abbott Laboratories (ABT 0.63%).
1. Johnson & Johnson
Over the years, Johnson & Johnson has certainly been the precise kind of company dividend seekers gravitate toward. The company currently offers a yield of 2.99% (the S&P 500's average is 1.54%) and is a Dividend King, having raised its payouts for 60 consecutive years, a period that included several recessions.
Over the past five years alone -- amid a once-in-a-hundred-years pandemic and the economic problems that came with it -- Johnson & Johnson hiked its dividends by 32.2%.
Still, past performance is not a guarantee of anything. Johnson & Johnson has dealt with issues that could affect it for a while. Most notably, it has encountered thousands of lawsuits related to its talc products, which plaintiffs have alleged cause cancer. Can the company adequately deal with this and other challenges? The answer is yes -- here is why.
Johnson & Johnson's pharmaceutical business is one of the largest in the world. It boasts medicines in a range of therapeutic areas, constantly develops newer products, and generates steady revenue, profits, and cash flow.
JNJ Revenue (Annual) data by YCharts.
Johnson & Johnson's medtech division provides some diversity and other growth avenues. One example lies within the promising robotic-assisted surgery area with its Ottava surgical robot. Further, J&J's revenue growth should increase now that it has eliminated its consumer health division, which typically grew its sales at a lower rate than its remaining segments.
And while the tech giant's legal issues are worth monitoring, Johnson & Johnson has moved closer to putting the most challenging of the bunch in the rearview mirror. The company's innovative ability within a sector that won't become obsolete anytime soon -- spending on prescription drugs will only increase as the world's population ages -- makes it an excellent stock to buy for good.
It also makes Johnson & Johnson's dividends about as safe as they come, so the company should continue rewarding shareholders with payout increases for a long time.
2. Abbott Laboratories
Abbott Laboratories is also a Dividend King, but this one is on its 51st consecutive year of payout increases. The company is a longtime leader in medical devices, although its business extends beyond that area. Its other segments are nutrition, diagnostics, and established pharmaceuticals. Abbott's diversified operations can be a strength.
The company showed as much during the pandemic; its core medical business declined due to the outbreak, but it kept its revenue growing by developing and marketing several coronavirus diagnostics tests. Still, Abbott's medical devices business is the most important for its long-term prospects.
The company has developed several important devices within this segment. Just last year, Abbott's continuous glucose monitoring (CGM) system, the FreeStyle Libre, earned the title of best medical innovation of the past 50 years from the Galien Foundation, a non-profit foundation recognizing innovative technologies in medicine.
The FreeStyle Libre is an especially promising product for Abbott Laboratories. Like other CGM devices, it helps patients stay on top of their blood glucose levels throughout the day much more efficiently than when they use blood glucose meters. The FreeStyle Libre has been linked to better health outcomes for diabetes patients.
Abbott Laboratories is one of the two companies, along with DexCom, that dominate this market. And with the number of diabetes patients (unfortunately) projected to continue growing, this could be a growth driver for Abbott for a while. But it's just one of the many devices in the company's arsenal. The healthcare giant has also made it a habit to grow key metrics.
ABT Revenue (Annual) data by YCharts.
Given the company's innovative ability and entrenched position in the healthcare sector, that should continue for a while. Abbott Laboratories currently offers a yield of 1.91%, which isn't huge but is still a bit higher than the average for the S&P 500. Moreover, the company has increased its dividends by 82% in the past five years. Investors can count on Abbott Laboratories to remain a healthcare leader and an excellent dividend payer.
