The three major indexes gave investors a taste of the downs and ups of investing over the past couple of years, reaching into bear territory in 2022 and then rising in the double digits last year. It's impossible to predict with 100% certainty what the market will do this year, but there is reason to be optimistic about what's ahead. That's because history shows us bear markets always lead to better market times, and those times of strength -- bull markets -- last longer than times of weakness.
In any case, there's a type of stock that could offer great rewards no matter what the market is doing. I'm talking about dividend stocks, which pay you passive income each year just for owning them. In bull markets, you'll often benefit from these stocks' market performance and the extra income -- and in more difficult times, the dividend payments alone could bolster your portfolio. Here are my five top dividend stocks to buy hand over fist in 2024.
1. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ), as a Dividend King, has lifted its payment for more than 50 consecutive years. This track record shows rewarding shareholders is important to the company, so it's reasonable to expect the policy to continue.
J&J pays a dividend of $4.76 per share, representing a yield of 2.95%, surpassing that of the S&P 500. And the healthcare giant, generating more than $15 billion in free cash flow, has what it takes to financially support dividend increases.
Importantly, even more growth may be right around the corner for this company. Last year, J&J spun off its slower growth consumer health business to focus on its higher growth pharmaceuticals and medtech businesses. The company predicts it will launch 20 new drugs and 50 expansions of current products by 2030. And one-third of medtech sales will come from new products by 2027. So, buying J&J shares now could offer you a great combination of safety -- thanks to dividends -- and growth.
Coca-Cola (NYSE: KO) also makes the list of Dividend Kings after its many decades of dividend growth. The company pays $1.84 per share at a yield of 3.06%, like J&J, surpassing the yield of the S&P 500.
The world's biggest non-alcoholic beverage maker's cash dividend payout ratio shows it pays out 76% of free cash flow as dividends. And the company's rising free cash flow indicates this clearly is sustainable.
What drives this cash flow growth is Coca-Cola's high-quality business, selling its eponymous beverage and many other top brands -- from Dasani water to Minute Maid juices -- that keep customers coming back. Coca-Cola's solid moat, or competitive advantage, is this brand strength, and it helped the company continue to increase earnings even as higher inflation weighed on the consumer's buying power last year.
So, you can count Coca-Cola to progressively grow earnings and dividends almost regardless of the economic environment, making it a top stock to buy and hold for the long term.
3. Abbott Laboratories
I like Abbott Laboratories (NYSE: ABT) for its long history of dividend growth -- meet yet another Dividend King -- as well as its diversified healthcare business.
Let's talk dividend first. Abbott pays a dividend of $2.20 per share at a yield of 1.93%, surpassing the yield of the S&P 500, and like the companies I've mentioned above, Abbott has the solid free cash flow to sustain dividend growth. So, when you buy this stock, you can imagine your passive income increasing year after year.
As for Abbott's business, the company includes four units: medical devices, diagnostics, nutrition, and established pharmaceuticals. The charm of this is if one faces a particular headwind, the others can compensate -- this has happened with diagnostics, as the company's covid tests went from soaring to declining revenue. In the recent quarter, excluding the negative impact of covid tests, Abbott's sales rose more than 13% to $10 billion -- and all four businesses posted double-digit gains.
So, using Abbott's historical performance as a guide, you can count on steady earnings growth as you collect more and more passive income year after year.
AbbVie (NYSE: ABBV) made its debut back in 2013 when Abbott spun off its pharmaceuticals business, and since, the new company has increased its dividend 285%. Today, AbbVie pays a dividend of $6.20 per share, at a yield of 3.80%.
In the most recent earnings call, AbbVie said dividend growth remained a priority, even today as it goes through a significant transition. AbbVie's top-selling drug Humira faces biosimilar competition, and that equals declining revenue. But the company has groomed two newer immunology drugs -- Rinvoq and Skyrizi -- to take over and together surpass Humira's peak revenue by the end of the decade.
Rinvoq and Skyrizi, heading for $11.6 billion in sales for the full year 2023, are on the right path. On top of this, AbbVie also has a full portfolio of other major drugs in areas including neurosciene and aesthetics, and a promising pipeline too.
All of this means the stock could deliver increasing growth -- and dividends -- as AbbVie approaches its goals.
Medtronic (NYSE: MDT) is another company involved in a transition phase that's set to lead to increasing growth. The medical device giant has taken steps to become more efficient, divest slow-growth businesses, and invest in growth areas such as artificial intelligence (AI).
At the same time, Medtronic has committed to making dividend growth a priority. In the company's most recent earnings report, it said it aims to return at least 50% of free cash flow to shareholders each year. In the 2023 fiscal year, it returned $4 billion, or 86% of free cash flow, in the form of dividends and share repurchases.
Medtronic pays a dividend of 2.76, at a yield of 3.20%, and has increased its payouts for more than 45 years. Considering its prioritization of dividend growth, its steps to boost earnings, and the fact that it's very close to becoming a Dividend King, this company makes a top dividend stock to buy hand over fist this year.
Should you invest $1,000 in Johnson & Johnson right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
My 5 Top Dividend Stocks to Buy Hand Over Fist in 2024 was originally published by The Motley Fool
As a seasoned financial expert with extensive knowledge in investment strategies, particularly in dividend stocks, let's delve into the concepts and details mentioned in the provided article:
Overview of Market Trends: The article begins with a brief overview of the market's performance over the past few years, emphasizing the unpredictability of market movements. It mentions the bear market in 2022 followed by a rebound in double digits in the previous year. The author expresses optimism about the future, citing historical evidence that bear markets precede periods of better market performance.
Dividend Stocks as a Strategy: The central theme revolves around the concept of investing in dividend stocks, which are portrayed as a reliable strategy to navigate both bull and bear markets. Dividend stocks are highlighted for their ability to provide passive income through regular dividend payments.
Top 5 Dividend Stocks for 2024: The article then presents the author's top five dividend stock picks for 2024, providing detailed insights into each:
Johnson & Johnson (JNJ):
- Recognized as a Dividend King with a history of over 50 consecutive years of dividend increases.
- Pays a dividend of $4.76 per share, yielding 2.95%, surpassing the S&P 500.
- Recent strategic focus on higher growth pharmaceuticals and medtech businesses.
- Another Dividend King with a long history of dividend growth.
- Pays $1.84 per share with a yield of 3.06%, exceeding the S&P 500.
- Strong cash flow sustainability and a diverse portfolio of popular brands.
Abbott Laboratories (ABT):
- Recognized as a Dividend King with a diversified healthcare business.
- Pays a dividend of $2.20 per share, yielding 1.93%, surpassing the S&P 500.
- Four business units: medical devices, diagnostics, nutrition, and established pharmaceuticals.
- Spun off from Abbott in 2013, showing a 285% increase in dividends since.
- Pays a dividend of $6.20 per share with a yield of 3.80%.
- Transitioning from reliance on Humira to new immunology drugs, Rinvoq and Skyrizi.
- Undergoing a transition phase, divesting slow-growth businesses and investing in AI.
- Pays a dividend of $2.76, yielding 3.20%, with a commitment to dividend growth.
- Prioritizing efficient growth strategies and aiming to become a Dividend King.
Investment Recommendations and Financial Analysis: The article concludes with a suggestion to invest in the mentioned dividend stocks, presenting them as attractive options for investors in 2024. It includes snippets from The Motley Fool Stock Advisor analyst team, highlighting their stock picks and the outperformance of their service compared to the S&P 500 since 2002.
Disclosure and Additional Information: The article ends with a disclosure that the author, Adria Cimino, has no position in the mentioned stocks. It also discloses that The Motley Fool has positions in and recommends Abbott Laboratories and recommends other options. This adds a layer of transparency regarding potential conflicts of interest.
In summary, the article provides a comprehensive overview of market trends, advocates for dividend stocks as a resilient investment strategy, and offers specific recommendations for the top five dividend stocks in 2024, supported by in-depth financial analysis and historical performance.