Every so often, Wall Street offers a reminder to investors that, despite popular belief, stocks don't rise in a straight line. Although the annualized return of stocks over the last century trumps all other asset classes, corrections, bear markets, and even crashes are normal, healthy, and inevitable.
Over the last two months, the flagship Dow Jones Industrial Average (^DJI 0.95%), benchmark S&P 500 (^GSPC 1.33%), and growth-centric Nasdaq Composite (^IXIC 1.59%) have all slid by a double-digit percentage. The Dow and S&P 500 have officially entered correction territory, while the Nasdaq Composite has fallen into a bear market, with a loss exceeding 20% from its all-time closing high.
But it's not just the magnitude of these declines that stands out -- it's also the recent velocity of these drops. Since April 2nd, the Dow, S&P 500, and Nasdaq Composite have all logged some of their steepest single-session point and percentage declines on record. For instance, the S&P 500 logged its fifth largest two-day percentage decline in history from the close of April 2 to the close on April 4, which is what qualified this move lower as a crash (even though we're no longer in an ongoing crash).
President Donald Trump discussing auto tariffs with reporters. Image source: Official White House Photo.
President Trump's tariff policy removed Wall Street's safety net
While a confluence of factors has worked to whipsaw equities and push them rapidly lower in recent weeks, such as the historical priciness of stocks entering 2025, nothing has been more pivotal in pulling the rug out from under the stock market than President Donald Trump's "Liberation Day" tariff announcements.
Following the closing bell on April 2, Trump outlined his tariff policy, which includes a 10% sweeping global tariff, as well as the introduction of higher reciprocal tariffs on nations that have historically run negative trade balances with the U.S.
Keeping in mind that President Trump implemented a 90-day pause on these higher reciprocal tariffs for all countries, save China, on April 9, there remains a wall of worry concerning the use of tariffs.
To begin with, there's the possibility of tariffs making domestic goods pricier and reigniting the prevailing rate of inflation. Trump's tariff announcements make little differentiation between output and input tariffs. Whereas the former are duties placed on finished goods, the latter represent an added tax on a component used to complete a finished product in the U.S. Input tariffs run the risk of making domestic products less price-competitive.
Tariffs also have the potential to hurt trade relations with our allies, as well as other countries. Even if individual trade deals can be worked out, anti-American sentiment from consumers and businesses in foreign markets could hurt demand for U.S. goods.
Additionally, the president changing his tune seemingly every few days on which products or countries will be impacted by tariffs is disrupting the stock market.
Though it's unclear when volatility will subside, the wake of this tariff-induced crash has rolled out the red carpet for investors to snag amazing stocks at a bargain. What follows are two unparalleled dividend stocks that can be confidently bought at a discount following the Trump tariff crash.
Image source: Getty Images.
Johnson & Johnson: 3.31% yield
When it comes to dividend stocks, pharmaceutical juggernaut Johnson & Johnson (JNJ +0.32%) is in rarified territory. It's increased its base annual payout for 63 consecutive years, which is a continuous streak that's been outdone by only eight other publicly traded companies. This is a way of saying that J&J's dividend is about as rock-solid as they come on Wall Street.
Were this not enough, Johnson & Johnson is one of only two public companies to be bestowed with the highest-possible credit rating (AAA) from Standard & Poor's (S&P). J&J's AAA-credit rating signals S&P's utmost faith in the company servicing and repaying its outstanding debts.
Despite concerns about President Trump imposing tariffs on pharmaceuticals, Johnson & Johnson's operating model should be largely unaffected by what the president chooses to do on the trade front. Healthcare stocks tend to be highly defensive, thanks in part to patients needing prescription medicines and medical devices in any economic climate. Since we have no control over when we become ill or what ailment(s) we develop, demand for J&J's products is consistent year after year.
Something else consistent with Johnson & Johnson is its executive suite. In the 139 years since going public, it's had just 10 CEOs, including current CEO Joaquin Duato. This is a level of continuity that's rarely observed in global powerhouses, and it's ensured that key growth initiatives have been seen through from start to finish.
NYSE: JNJ
Key Data Points
Arguably the most-important of these growth trends has been J&J's shift toward novel-drug development. For more than a decade, Johnson & Johnson has spent aggressively to build out its oncology, cardiovascular, and immunology segments, to name a few areas of focus. Even though novel therapies have a finite period of sales exclusivity, they can offer superior growth and margins.
Lastly, Johnson & Johnson stock is historically inexpensive. While investors are collecting a market-topping 3.3% yield, they'll hold J&J stock at a multiple of 14 times forward-year earnings. This works out to an 11% discount to its forward-year price-to-earnings (P/E) ratio over the last half-decade.
Sirius XM Holdings: 5.36% yield
A second unparalleled dividend stock that can be purchased at a significant discount in the wake of the Trump tariff crash is satellite-radio operator Sirius XM Holdings (SIRI 1.68%). As of the closing bell on April 21, Sirius XM was dishing out a nearly 5.4% yield.
What makes Sirius XM unique is that it's one of America's legal monopolies. While I don't want to give the impression that it's not fighting for listeners with terrestrial and online radio providers, it's important to recognize that no other company possesses the licenses to operate a satellite radio network. Ideally, this provides Sirius XM with a level of subscription pricing power that its competitors can't match.
NASDAQ: SIRI
Key Data Points
Another key difference between Sirius XM and traditional radio operators is their respective revenue streams. Online and terrestrial radio companies rely almost exclusively on advertising to keep the lights on. This strategy is helped by extended periods of economic growth, but it can come under fire when the U.S. economy stumbles and ad revenue dries up.
Sirius XM closed out 2024 by bringing in just 20% of its net sales from advertising, which ties back to its 2019 acquisition of online radio company Pandora. The bulk of Sirius XM's net sales (76%) can be traced to its self-pay subscriptions. Though self-pay subscriptions have strong ties to the auto industry and can be cyclical, Sirius XM is less likely to see subscribers cancel their service than traditional radio operators are to have businesses slash their ad spending.
The other interesting quirk investors get with Sirius XM Holdings is a modest degree of cost predictability. While royalty expenses will vary from one quarter to the next, transmission and equipment costs are often fairly static no matter how many subscribers the company has.
To round things out, Sirius XM stock is valued at just 6.6 times forward-year earnings. This represents a 55% discount to its average forward P/E multiple from 2019 through 2024.
