Ben Reynolds — one of MoneyShow's most popular contributors — has just launched a new advisory service, Sure Passive Income. To introduce the service, Ben shares 4 stocks recommended in his first issue.
The pandemic sunk the economy into recession this year, and the outlook moving forward remains highly uncertain. In times of economic recession, investors should prioritize dividend safety. Instead of buying stocks with the highest yields, it makes sense to focus on quality.
Read Buy & Hold Forever Stocks: Part 2
Read Buy & Hold Forever Stocks: Part 3
Read Buy & Hold Forever Stocks: Part 4
Stocks across multiple hard-hit industries, such as retail, restaurants, and energy, have cut or suspended their dividends in 2020, with more likely to follow if the U.S. economy enters an even deeper recession.
Investors looking for dividend safety should take a closer look at these four blue-chip dividend stocks. All four stocks were included in the inaugural edition of the new Sure Passive Income newsletter. We believe all four stocks with continue to raise their dividends each year, regardless of the state of the economy.
Johnson & Johnson (JNJ) is a diversified health care giant, with over $82 billion in 2019 revenue and a market capitalization of $379 billion. J&J is a global leader in three separate categories—consumer health, medical devices, and pharmaceuticals. Approximately 40% of sales last year were generated outside the United States.
This diversification has served the company well, as it has a long history of generating steady growth. For the past 36 years in a row, Johnson & Johnson has reported positive growth in its adjusted operating earnings. It has also raised its dividend for 58 consecutive years. Such a long history of dividend growth places Johnson & Johnson on the exclusive list of Dividend Kings.
It has increased its dividend each year, even during recessions. Johnson & Johnson performed very well in the ‘Great Recession’ of 2008-2009. Earnings-per-share grew by 10% in 2008, and 1% in 2009, during the Great Recession. The company’s resilience stems from the fact that as a healthcare manufacturer, its customers cannot stop purchasing their products, even in a recession.
Investors can expect the company to continue growing its dividend each year, because of its global competitive advantages such as its massive research and development. Johnson & Johnson’s R&D totaled $11.4 billion last year, the 10th highest sum in the world. The result of its high annual R&D investment is that Johnson & Johnson has a large portfolio of industry-leading brands.
In fact, Johnson & Johnson has 26 individual platforms or products that each generate over $1 billion in annual sales. Approximately 25% of the company’s sales come from products that were launched in the last five years, which demonstrates the effectiveness of Johnson & Johnson’s massive R&D platform. The company has continued to perform well in 2020, even with the coronavirus pandemic wreaking havoc on the global economy.
Johnson & Johnson announced third-quarter earnings results on October 13th which showed 2% operational sales growth along with 3.8% adjusted earnings-per-share growth. The pharmaceutical segment continued to perform well, with sales growing 5%, while consumer sales grew 1.3% for the most recent quarter.
Johnson & Johnson’s dividend payout is highly secure, thanks to the company’s highly profitable and recession-resistant business model. The company possesses a credit rating of AAA, making it only one of two U.S. companies to hold the highest credit rating from S&P (the other being Microsoft). Johnson & Johnson stock has a 2.8% current dividend yield.
