2 Unstoppable Dividend Stocks to Buy if There’s a Stock Market Sell-Off

Dividend stocks offer a great way to add cash to your portfolio and help you compound your overall returns with time. Whether you use that dividend money to add to your portfolio or cash it out, these types of stocks can help you diversify the types of businesses you own shares in.

When it comes to investing in dividend stocks, you need to make sure the companies you buy have a strong underlying business and balance sheet that will support and help grow the dividends being paid out. A top dividend stock will also have a history of maintaining and raising its dividend in a wide range of market environments.

On that note, here are two top dividend stocks to consider for your portfolio. Each performs well, whether the bull market continues or bearish investor sentiment returns. If the bear market does return, these stocks have proven over the decades to be safe ones to hold.

1. Johnson & Johnson

Johnson & Johnson (JNJ 0.25%) has paid out and raised its dividend every single year for 62 years and counting. That places the pharmaceutical giant in a very select group of companies that have earned the moniker Dividend King.

J&J boasts a forward dividend yield of 3.4%, which is more than twice the average yield among S&P 500 stocks. Looking back over the last decade, Johnson & Johnson’s dividend has increased an average of 6% annually. Its payout ratio is a very manageable 30%.

J&J’s dividend helps to make up for the stock’s relatively weak stock performance over the last several years. The weak stock performance also somewhat helps explain the higher-than-average yield. The stock is down based on several factors, but one of the biggest is ongoing litigation and potential multi-billion liabilities related to its talc products. The company has roughly $26 billion in cash on its balance sheet to help manage these ongoing lawsuits and eventually pay settlements while also maintaining its commitment to shareholders.

Investing in Johnson & Johnson also means putting cash into a company that has been in business for 138 years, and is one of the top pharmaceutical companies in the world by revenue. Over the trailing 12 months, the company has brought in over $17 billion in profits on about $86 billion in revenue. It’s also generated approximately $24 billion in levered free cash flow looking back over the last 12 months.

Last year, J&J spun off its slower-growing consumer healthcare product segment into a company called Kenvue. The remaining two divisions — pharmaceuticals and medical devices — are faster growing and should help J&J boost its growth efforts in the coming years. The company has returned approximately 60% of free cash flow to investors over the last five years, while 65% of sales come from products in which it controls the top or second global market share position.

In the short term, this is likely not a business for growth-oriented investors. However, long-term investors seeking a company that generates steady financial gains from a broad portfolio of valuable pharmaceuticals and medical devices may find Johnson & Johnson poses a compelling investment opportunity. With its stock price underperforming, Johnson & Johnson’s storied dividend history makes the business an attractive selection for income-seeking investors. When its underlying issues, including expensive litigation finally get resolved, share prices are likely to rise.

2. Coca-Cola

Coca-Cola (KO -0.41%) boasts a dividend yield of around 3% and has faithfully raised its dividend every year for 62 years as well. The beverage giant doesn’t generate massive stock price gains these days, but its dividend and share price increases have helped deliver a total return of 46% over the last five years and over 108% in the trailing 10-year period.

Founded in 1886, the company now manages one of the largest beverage operations in the world. Coca-Cola controls roughly 46% of the soft drink market in the U.S., one of its largest markets.

Over the trailing 12 months, Coca-Cola has delivered profits of about $11 billion on revenue of $46 billion. It’s maintained a profit margin of around 23%, an exceptional figure in an industry where margins are historically razor-thin. The company has a payout ratio of about 74%, which is relatively high but still quite manageable. Its dividend has grown an average of 5% annually over the past decade. 

Just in the past 12 months, the company has brought in operating cash flow of about $12 billion, with levered free cash flow of approximately $11 billion. Currency headwinds and a fluctuating macro environment have impacted the company’s growth in the last few years, but its commitment to its dividend and the strength of its balance sheet remain a testament to the resilience of this business.

Long-term buy-and-hold investors looking for steady portfolio growth and dividends can find a lot to love about Coca-Cola.