Would you like a relatively safe way to boost the amount of passive income you have to work with after you retire? Try beginning your search with the 30 stocks that make up the Dow Jones Industrial Average.
Income-seeking investors can be relatively confident about Dow stocks, because their underlying businesses must demonstrate profitability on a recurring basis before they're even considered for addition to the index.
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At recent prices, the average stock in the Dow Jones Industrial Average index offers a paltry 1.9% yield. These three stocks offer yields that are way above the average. Here's why they could be great portfolio additions for those who want more passive income during their retirement years.
Johnson & Johnson
At recent prices, Johnson & Johnson (JNJ -0.46%) offers a 3% dividend yield. The company shares a name with some of the consumer health products it sold for over a century, but it's no longer a consumer-focused company. Since spinning off its consumer health segment into a new company named Kenvue last year, the business that remained is focused on pharmaceuticals and medical technology.
Consumer health sales crawled forward at a snail's pace. Now that the company is focused on the more lucrative medical technology and pharmaceutical industries, investors can reasonably expect overall growth at a high-single-digit percentage for years to come.
Total fourth-quarter sales rose 7.3% year over year, and, as expected, the newly streamlined company's bottom line rose even further. Fourth-quarter earnings jumped 39% year over year to $1.70 per share. That's more than enough to cover quarterly dividend payments that are currently set at $1.19 per share.
Johnson & Johnson owes some of its impressive fourth-quarter performance to the $16.6 billion acquisition of Abiomed it made in late 2022. This is one of few companies on earth with a salesforce that can make the most of Abiomed's patented heart pumps and the enormous recurring cash flows that advantageous acquisitions like this require.
Last April, Johnson & Johnson raised its dividend payout for the 61st year in a row. With an enduring cost advantage, income-seeking investors can reasonably rely on it to continue boosting payouts for many years to come.
Verizon Communications
The first nine months of 2023 were not very good ones for Verizon (VZ 1.17%) shareholders. The number of postpaid phone subscribers fell, and so did the stock price.
Phone subscriptions started picking up again in late 2023, but the stock hasn't responded as strongly as it probably should. A lull in consumer phone subscriptions didn't stop the company from raising its dividend payout for the 17th consecutive year last September.
At recent prices, Verizon stock offers a big 6.7% yield, and there's a good chance it will continue its streak of annual payout raises over the long run. In recent years, the company invested heavily in expanding its 5G infrastructure. Those investments are driving demand for broadband internet services from businesses and individuals.
Last year, Verizon added 1.7 million new broadband internet subscribers, 1.5 million of which signed up for the company's new fixed wireless service, which relies on stable 5G connections.
With its heaviest 5G investments already in the rearview mirror, Verizon's cash flows improved significantly last year. Free cash flow rose 33% in 2023 to $18.7 billion, but the company had to pay out only $11 billion in dividends.
There was $150.7 billion in debt on its balance sheet at the end of 2023, so reducing interest expenses will probably be a higher priority than dividend bumps over the next several years. With a big yield upfront, though, it doesn't need to raise its payout rapidly to produce market-beating gains for patient investors. Adding some shares to a diversified portfolio now to hold over the long run looks like a very smart move.
