Investors looking for income can find plenty of opportunities in any market environment.
Dividend stocks are a great way to add cash to your portfolio and increase your overall returns over time. Whether you use the dividends to add to your portfolio or to cash out, these types of stocks can help you diversify the types of businesses in which you own shares.
When it comes to investing in dividend stocks, you want to make sure the companies you buy have strong underlying businesses and balance sheets that can help support and grow their dividend payments. Top dividend stocks also have a track record of maintaining and growing their dividends in a variety of market environments.
In this regard, here are two top dividend stocks to consider for inclusion in your portfolio. Both stocks perform well whether the bull market continues or bearish investor sentiment returns. In case the bear market returns, these stocks have proven to be safe to hold for decades.
1. Johnson & Johnson
Johnson & Johnson (J.N.J. 0.25%) The company has paid and increased its dividend every year for 62 years, putting the pharmaceutical giant in a very select group of companies that have earned the title of Dividend King.
J&J boasts a dividend yield of 3.4%, more than double the average yield. S&P 500 Over the past decade, Johnson & Johnson’s dividend has grown by an average of 6% per year, giving it a very manageable payout ratio of 30%.
J&J’s dividends have helped make up for the relatively weak performance of the company’s stock price over the past few years, which also goes some way to explaining the higher than average yield. There are a few reasons why the stock price is declining, but one of the biggest factors is the ongoing litigation and potential billions of dollars of liability related to its talc products. The company has approximately $26 billion in cash on its balance sheet to manage ongoing litigation and ultimately pay settlements, while also remaining committed to shareholders.
Investing in Johnson & Johnson means putting your money into a 138-year-old company that is one of the world’s leading pharmaceutical companies by revenue. Over the past 12 months, the company has generated more than $17 billion in profits on revenues of about $86 billion. Over the past 12 months, the company has also generated about $24 billion in leveraged free cash flow.
Last year, J&J sold its slowing consumer health care products division to KenviewThe remaining two divisions, pharmaceuticals and medical devices, are faster-growing and should help fuel J&J’s growth efforts in the coming years. The company has returned about 60% of its free cash flow to investors over the past five years, and 65% of its sales come from products that are number one or number two in global market share.
In the short term, this is probably not a business for growth-oriented investors. However, for long-term investors looking for a company that generates stable income from a broad portfolio of high-value pharmaceuticals and medical devices, Johnson & Johnson may be an attractive investment opportunity. Although the stock price has been struggling, Johnson & Johnson’s renowned dividend track record makes it an attractive option for income-seeking investors. If underlying issues such as costly litigation are eventually resolved, the stock price could rise.
2. Coca-Cola
coca cola (K.O. -0.41%) The company boasts a dividend yield of about 3% and has faithfully increased its dividend every year for 62 years. While the beverage giant hasn’t seen any big share price gains recently, its dividend and stock price growth have delivered total returns of 46% over the past five years and more than 108% over the past 10 years.
Founded in 1886, the company now operates one of the world’s largest beverage businesses. Coca-Cola controls about 46% of the soft drink market in the United States, one of its largest markets.
Over the past 12 months, Coca-Cola made approximately $11 billion in profits on revenue of $46 billion. The company has maintained profit margins of approximately 23%, which is unusual in an industry that has historically had very low margins. The company’s dividend payout ratio is approximately 74%, which is relatively high but still very manageable. The company’s dividend has grown by an average of 5% annually over the past decade.
In the past 12 months alone, the company generated approximately $12 billion in operating cash flow and approximately $11 billion in leveraged free cash flow. Currency headwinds and a volatile macro environment have impacted the company’s growth over the past few years, but its commitment to dividends and the strength of its balance sheet are testament to the resilience of the business.
For long-term investors looking for stable portfolio growth and dividends, Coca-Cola has a lot to offer.
Rachel Warren invests in Johnson & Johnson. The Motley Fool invests in and recommends Kenview. The Motley Fool recommends Johnson & Johnson and recommends the January 2026 $13 call option on Kenview. The Motley Fool has a disclosure policy.
