In the past 12 months, at least two prominent dividend stocks decreased their payouts. Last year, it was Medical Properties Trust, a healthcare-focused real estate investment trust, while pharmacy chain giant Walgreens Boots Alliance started 2024 with a similar move.
These dividend cuts highlight the importance of finding stocks whose businesses are strong enough to support dividend increases even in challenging times. Fortunately, such stocks exist: Johnson & Johnson (JNJ +0.43%), Apple (AAPL 1.09%), and Visa (V 0.68%) are three great examples.
1. Johnson & Johnson
As far as dividend track records go, it's hard to find many more impressive than Johnson & Johnson's. The company is on its 61st consecutive year of payout increases and the stock currently yields about 3%. That demonstrates a resilient and innovative business that can navigate challenging conditions, economic and otherwise, while constantly delivering strong financial results. And we can expect more of the same from Johnson & Johnson for many more years as the drugmaker's lineup features more than a dozen blockbusters.
Once those run out of patent exclusivity, J&J has a deep pipeline that will help it replace key medicines. The company also boasts a promising medtech division that develops products across several areas. Key growth opportunities here include its robotic-assisted surgery device, Ottava.
NYSE: JNJ
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Johnson & Johnson isn't without risks. The company faces several challenges, including a relatively new law in the U.S., the Inflation Reduction Act, that gave Medicare the power to negotiate drug prices. The result could be lower sales for the companies that make these medicines, including Johnson & Johnson.
However, the drugmaker should be able to handle this issue by developing brand-new medicines that can escape this regulatory burden. Johnson & Johnson remains a top stock that will likely continue paying and raising its dividends for a long time.
2. Apple
Apple is best known for the iPhone, but the company's billion-dollar franchise is no longer a source of significant revenue growth. That shouldn't be too much of a problem, though; Apple is adapting its business and still has excellent growth prospects. The company has an installed base of more than 2.2 billion devices whose owners are eager to buy services.
Apple's services segment offers a suite of products from music and video streaming to health-related subscriptions. Apple's services don't yet account for most of its revenue, but they have grown faster in recent years.
The company's services segment also carries much juicier margins. The result will be stronger net profits, even if that might take awhile. The point is that Apple's business is solid and should continue performing well for a long time.
NASDAQ: AAPL
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Not only does Apple have more than 2.2 billion people within its ecosystem, but the company's customers are incredibly loyal. Apple's brand name is one of the most valuable in the world and the tech giant's ecosystem is hard to leave unless consumers don't mind abandoning important features that don't carry over to other devices, or losing data.
What about the dividend? Apple has increased its payouts by about 104% in the past decade, and still boasts a low cash payout ratio of only 14%. Although the stock yields under 1% right now, the company can raise its dividends substantially without worries. And that's precisely what it's likely to do over the long run.
3. Visa
Everyone knows the Visa brand: The company helps facilitate credit card transactions through its payment network. There are millions of such transactions every day, and Visa collects a fee every single time. The company has few direct competitors, partly thanks to its network effect. At this point, any business that doesn't accept Visa as a payment method is practically begging customers to stay away.
NYSE: V
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And the more businesses are plugged into its network, the more consumers getting brand-new credit cards will be attracted to it. This dynamic has been going on for a while and is partly responsible for Visa's strong financial results. Despite millions of credit cards with its logo in circulation, Visa still has excellent growth prospects. The company will continue making money as long as card spending increases and people move away from cash and checks..
That's been an ongoing trend for years, but there's plenty of runway ahead. Visa sees a significant opportunity to digitize cash and check transactions, even in advanced economies like the U.S. So it hasn't reached a ceiling yet -- far from it.
The company's dividend record over the past decade has been fantastic. Visa has increased its payouts by an incredible 420% while its cash payout ratio remains conservative at about 20%. The stock currently yields under 1%.
Visa's competitive advantage and long-term prospects point to further dividend growth, and that's why dividend investors can safely keep this stock in their portfolios for good.
