The stock market is currently thriving, with the S&P 500 index reflecting a remarkable 19% surge in 2024. This marks a strong indication of a much-anticipated bull market, which typically offers investors extended opportunities to benefit from ongoing market optimism. However, even during such prosperous periods, challenges can unexpectedly arise, as evidenced by this summer’s abrupt 8% decline in the S&P 500 over just three weeks.
These market fluctuations underscore the importance of maintaining a balanced investment strategy that includes resilient options capable of withstanding downturns. In particular, dividend stocks can serve as a stabilizing force, providing investors with a reliable income stream regardless of market volatility. Let’s explore two standout dividend stocks that are worth considering for your portfolio, especially as protective measures against potential sell-offs.
Johnson & Johnson
A beacon of stability in the pharmaceutical and consumer health sector, Johnson & Johnson (NYSE: JNJ) is classified as a Dividend King, having consistently increased its dividend for over 60 years. This long-standing commitment to rewarding shareholders underscores the firm’s dedication to financial health and stability. Currently, J&J offers an annual dividend payout of $4.96 per share, translating to a dividend yield of approximately 3%—well above the S&P 500 average of 1.3%.
One of the most appealing aspects of J&J is its impressive free cash flow of $19 billion, which affirms its capacity to sustain and potentially increase dividend payouts even in challenging economic climates. Moreover, the company’s diverse portfolio allows it to weather economic fluctuations effectively. With a broad range of essential medical devices and pharmaceuticals, J&J remains a critical supplier to hospitals and patients, leading to stable earnings year-round.
In addition to its strong dividend outlook, J&J’s strategic decisions, such as the recent spin-off of its consumer health segment, have positioned it well for growth in its remaining innovative pharmaceuticals and medtech divisions. These sectors are not only growing but also helped propel J&J to report a significant revenue increase, reflecting its resilience and adaptability.
Abbott Laboratories
Similarly reliable is Abbott Laboratories (NYSE: ABT), which shines as another Dividend King, with a remarkable track record of over 52 consecutive years of dividend increases. Abbott currently pays an annual dividend of $2.20 per share, offering a yield of 1.9%, which exceeds that of the average S&P 500 stock. This consistency reflects Abbott’s strong financial foundation, supported by free cash flow of $5.6 billion.
The company boasts a diverse business model divided across various sectors, including medical devices, diagnostics, nutrition, and established pharmaceuticals. This diversification enables Abbott to balance out the weaknesses of any one segment with strengths from others, maintaining overall growth. Notably, while its diagnostics division may be facing headwinds due to a decline in COVID-19 testing, Abbott’s medical devices segment has seen over 10% revenue growth recently, allowing for a revised upward forecast for the company’s overall revenue.
Abbott’s robust pipeline of growth opportunities—from new product approvals to expanded uses for existing items—positions it for sustained success in the coming years. This proactive approach, combined with consistent dividend payouts, makes Abbott a compelling choice for investors seeking both stability and growth.
Investing Considerations
As the stock market continues to fluctuate, it’s essential for investors to have a strategy that balances risk and reward. Both Johnson & Johnson and Abbott Laboratories exemplify this balance, offering opportunities for passive income through dividends while maintaining solid growth prospects. While both firms have demonstrated historical reliability, potential investors should continually assess their positions and stay informed on market dynamics.
Before committing to an investment in Johnson & Johnson or any stock, consider reviewing expert recommendations and analyses that highlight various investment paths. Ultimately, aligning your investment choices with your financial goals and risk tolerance will help to safeguard your portfolio amidst uncertainty in the stock market.