Dividend stocks are like the vegetables of a portfolio -- while they tend to be unexciting, they certainly can be wonderful for your long-term financial health. If you can find a strong dividend-paying company with a dominant market position in its industry, you don't have to fret over the day-to-day gyrations of the market since you can count on that company to send you a dividend check for years on end without the need to constantly monitor its share price.
Wondering how exactly one finds such a dependable dividend-paying stock? You've come to the right place! We reached out to our team of Motley Fool contributors and asked them to share a stock idea that is a good choice for an investor who wants to take a "set it and forget it" mentality with a strong dividend payer.
George Budwell: At first glance, AstraZeneca (NASDAQ:AZN) might not look like a compelling dividend stock for risk-adverse investors. After all, the company's trailing-12-month payout ratio exceeds 200%, based on data provided by S&P Capital IQ. A deeper look, however, suggests that there's little cause for concern.
If we break it down, Astra's eye-popping payout ratio stems mainly from the loss of exclusivity for former top-sellers like heartburn medication Nexium. The good news is that management appears to have the company headed in the right direction to move past the so-called patent cliff.
In the third quarter, for instance, AstraZeneca reported that its revenues have stabilized thanks to the strong performance of key growth platforms such as its diabetes, cardiovascular, and respiratory franchises. As a result, the company's Core EPS is projected to grow by mid to high single digits.
While that's definitely good news, AstraZeneca is also steadily building out an impressive platform in immuno-oncology, headlined by its PD-L1 checkpoint inhibitor durvalumab, which is presently being explored as a first-line treatment for a variety of solid tumors and a host of blood-based malignancies. This high-growth immuno-oncology platform is expected to help to return the company back to growth by as early as 2017, and to start delivering double-digit sales growth by perhaps 2020.
Given that Astra's management hasn't suspended the divided during this period of diminishing free cash flows, and the company's growth platforms are starting to fire on all cylinders, income-seeking investors should rest assured that this dividend stock won't wreak havoc on their portfolios.
Todd Campbell: If you're looking to craft a long-term portfolio of dividend-paying companies that isn't likely to require a lot of hand-wringing, then it may be the perfect time to consider an investment in Johnson & Johnson (NYSE:JNJ).
Although plenty of stocks have higher dividend yields than Johnson & Johnson's, few companies boast the rock-solid fundamentals that have made Johnson & Johnson into one of Mr. Market's best dividend-paying companies.
Johnson & Johnson's products include top-selling consumer goods brands, such as Listerine and Band-Aid, and some of the world's best-selling medicine and medical devices. Last year, these various products brought in $74.3 billion in sales for Johnson and Johnson, including $32 billion in pharmaceuticals sales alone. Among its top-selling medicines are therapies used to battle diabetes, cancer, and schizophrenia, and billions of dollars in R&D spending every year suggest the company's market-leading position in drug development isn't likely to be challenged anytime soon.
Potentially even more important to dividend investors, however, is the fact that Johnson & Johnson's dividend track record is envy-inspiring. The company has increased its annual dividend every year for more than 50 years, and it's that kind of consistency that makes Johnson & Johnson one of my favorites for dividend investors to sock away for years and years.
Brian Feroldi: While Switzerland-based Novartis AG (NYSE:NVS) might not get the same level of notoriety as some of its U.S.-based brethren, with a market cap north of $230 billion, Novartis is truly an industry giant and a big player in the world of healthcare, making it a good choice for investors who want to take a hands-off approach to investing.
Novartis breaks out its business into three main operating units:
- Pharmaceuticals: Includes more than 50 company-owned branded drugs in a number of different disease states.
- Sandoz: A global leader in selling generic and biologic drugs, with over 1,000 drugs on the market.
- Alcon: A provider of surgical and pharmaceutical products related to eye care.
Each of these divisions are extremely well diversified across the world, and while currency movements are currently wreaking havoc on its reported results, on an operating business, this company is doing just fine. In the last quarter, Novartis' operating income was up a strong 14% over the year-ago period, which is the kind of growth many of its stateside peers would love to produce.
The company's Sandoz division is particularly well positioned to grow, as it made waves earlier in the year when it launched Zarxio, a biosimilar of Amgen's billion-dollar drug Neupogen. Zarxio was the first biosimilar (essentially a generic version of a biologic drug) drug ever approved in the U.S. That approval paved the way for a huge amount of biosimilar competition in the U.S., and Sandoz is in a prime position to capitalize. It currently counts several drugs that are in phase 3 trials that could eventually become biosimilar competition for multibillion-dollar drugs like Humira, Rituxan, and Neulasta.
All in all, the company plans to file 10 major biosimilars for regulatory approval in the coming three years, which could be a major tailwind to the company's growth.
While we wait for that story to play out, Novartis is currently paying out a nice 3% dividend yield, and the company has a good history of raising it each year. While Novartis is unlikely to produce huge returns into the coming years, this is a very stable business that should continue to grow for years to come, and could be a great choice for investors who want a dividend stock that doesn't require constant attention.