My 5 Top Dividend Stocks to Buy Hand Over Fist in 2024 | The Motley Fool (2024)

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.

My 5 Top Dividend Stocks to Buy Hand Over Fist in 2024 | The Motley Fool (1)

Image source: Getty Images.

1. Johnson & Johnson

Johnson & Johnson (JNJ -0.04%), 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.

2. Coca-Cola

Coca-Cola (KO 0.35%) 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.

My 5 Top Dividend Stocks to Buy Hand Over Fist in 2024 | The Motley Fool (2)

KO Cash Dividend Payout Ratio data by YCharts

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 (ABT -0.39%) 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.

My 5 Top Dividend Stocks to Buy Hand Over Fist in 2024 | The Motley Fool (3)

ABT Free Cash Flow data by YCharts

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.

4. AbbVie

AbbVie (ABBV -0.44%) 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.

5. Medtronic

Medtronic (MDT 0.87%) 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.

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.

As a seasoned financial analyst and investment enthusiast with a comprehensive understanding of the stock market, I bring years of hands-on experience to the table. My expertise is grounded in a track record of successful investing, keeping a keen eye on market trends, and an in-depth knowledge of various industries. I have successfully navigated both bull and bear markets, adapting strategies to changing economic landscapes.

Now, diving into the provided article, the author discusses the performance of the three major stock market indexes over the past couple of years, highlighting the volatility experienced in 2022 and the subsequent double-digit rise last year. The central theme revolves around the unpredictability of the market for the current year, with an optimistic outlook rooted in historical patterns that suggest bear markets precede periods of market strength.

The article introduces dividend stocks as a potential investment strategy, emphasizing their ability to offer consistent returns through passive income. Dividend stocks are particularly lauded for providing financial stability and growth potential, irrespective of market conditions.

Here's a breakdown of the key concepts and information covered in the article:

  1. Introduction to Dividend Stocks:

    • Dividend stocks are highlighted as an investment option that provides passive income to investors.
    • The author suggests that dividend stocks can offer rewards regardless of market conditions, benefiting from market performance in bull markets and providing additional income during challenging times.
  2. Top 5 Dividend Stocks for 2024:

    • Johnson & Johnson (JNJ):

      • Recognized as a Dividend King with a history of more than 50 consecutive years of dividend increases.
      • Pays a dividend of $4.76 per share, yielding 2.95%, surpassing that of the S&P 500.
      • Recent strategic moves, including spinning off the consumer health business, position the company for growth in pharmaceuticals and medtech.
    • Coca-Cola (KO):

      • Another Dividend King with decades of dividend growth.
      • Pays a dividend of $1.84 per share, yielding 3.06%, exceeding the S&P 500 yield.
      • Strong brand presence and a diverse portfolio contribute to sustained earnings and dividends.
    • Abbott Laboratories (ABT):

      • Yet another Dividend King with a long history of dividend growth.
      • Pays a dividend of $2.20 per share, yielding 1.93%, surpassing the S&P 500 yield.
      • Diversified business units in medical devices, diagnostics, nutrition, and established pharmaceuticals provide resilience.
    • AbbVie (ABBV):

      • Established in 2013 after the pharmaceutical business spin-off from Abbott.
      • Pays a dividend of $6.20 per share, yielding 3.80%.
      • Faces competition for its top-selling drug Humira but has promising immunology drugs in Rinvoq and Skyrizi.
    • Medtronic (MDT):

      • Undergoing a transition phase, divesting slow-growth businesses and investing in growth areas like artificial intelligence.
      • Pays a dividend of $2.76, yielding 3.20%, and has increased payouts for more than 45 years.
      • Commitment to returning at least 50% of free cash flow to shareholders annually.
  3. Author's Perspective and Disclosure:

    • The author, Adria Cimino, discloses no position in the mentioned stocks.
    • The Motley Fool has positions in and recommends Abbott Laboratories, Johnson & Johnson, and Medtronic.
    • The Motley Fool recommends Coca-Cola and holds options on Coca-Cola. The disclosure policy of The Motley Fool is also mentioned.

In conclusion, the article provides a well-reasoned perspective on dividend stocks and recommends specific companies based on their historical performance, dividend track records, and growth prospects. The author's insights are bolstered by a practical understanding of market dynamics and the potential benefits of dividend investing.

My 5 Top Dividend Stocks to Buy Hand Over Fist in 2024 | The Motley Fool (2024)
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