Why these 3 dividend aristocrats are good buys during a bear market

The only thing that is certain in the stock market is uncertainty. While large, financially strong companies inevitably perform well over the long term, their short-term performance can be volatile and dependent on many factors, some of which are beyond your control.

If you’re a long-term investor, the daily fluctuations in stock prices shouldn’t faze you, but there are ways to keep making money, even during bear markets. One way is to own dividend stocks. And while many companies pay dividends, only a few raise their dividends annually. The ones in the S&P 500 who can consistently increase their annual dividend payout for at least 25 consecutive years earn the rare designation of Dividend Aristocrats.

Let’s take a closer look at three of these Dividend Aristocrats that would make good buys during a bear market.

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Image source: Getty Images.

1. 3M: 63 years of annual dividend increases

3M (MMM 0.54% ) is a conglomerate operating in the worker safety, consumer goods, transportation, and healthcare sectors and played a major role in fighting the COVID-19 pandemic. The company has a strong portfolio, and 2021 turned out to be a lucrative year for the company, generating $35.4 billion in sales, up 9.9% from 2020. That organic sales growth was consistent across several segments of the company:

  • Security and industrial: $12.9 billion (7.8% more).
  • Transportation and electronics: $9.8 billion (up 9%).
  • Health care: $9.1 billion (up 8.6%).
  • Consumer goods: $5.9 billion (up 17%).

While 3M’s stock performance has been disappointing for the past five years (down more than 21.3%) as it faces some long-term litigation, the company has paid dividends to its shareholders steadily for over 100 years and has increased the dividend annually. for 63 consecutive years (earning it the even rarer designation as dividend king). That shows the company can reward investors with ever-increasing payouts, whether the economy is generally doing well or in a downturn. In 2021 alone, the company returned $3.4 billion in dividends with a yield of 3.95%.

Combine the impressive dividend-paying track record with its $2 billion investment in research and development in 2021, and there’s little reason to believe the company plans to stop lucratively rewarding investors any time soon.

2. Coca-Cola: 59 years of annual dividend increases

As the world’s leading beverage company, Coca Cola (KO 1.40% )has been one of the first first class shares for quite some time. In 2021, the beverage giant generated $38.7 billion in revenue, up 17% from 2020. While that number is a bit skewed by comparisons to a harsh COVID-19-affected 2020, it’s not nearly as bad. away as Coca-Cola has a strong track record of revenue growth. Not only did the company manage to post impressive revenue figures, but its cash flow also increased by $2.8 billion to $12.6 billion. This suggests that the company has the pricing power to help it combat rising production costs.

For each of the last 59 years, Coca-Cola has increased its annual dividend and the company has returned $7.3 billion to investors in 2021 ($1.76 per share). With a yield of 2.84%, the payout is well above the S&P average (1.3%). And that outperformance is present despite stocks trading at levels not seen since just before the pandemic. The share price is up more than 18% in the last year and almost 47% in the last five years.

Even if the share price doesn’t rise at these same rates, investors can take comfort in knowing that their dividend payments will be reliable and sustained during any bear market.

3. Johnson & Johnson: 59 years of annual dividend increases

pharmaceutical giant Johnson and Johnson (JNJ 0.54% ) has been around for more than 130 years and has built a sizable product portfolio with billion-dollar brands in consumer health, medical technology and pharmaceuticals. It was one of three companies approved for use of a COVID-19 vaccine and earned $2.4 billion in 2021. In 2021, Johnson & Johnson generated revenue of $93.8 billion (13.6% more), with 24.8 billion dollars (10.4% more). ) arriving only in the fourth quarter.

Johnson & Johnson’s dividend yields are 2.39% and it has earned its place as a dividend aristocrat by increasing dividend payouts in each of the last 59 years. It currently pays $1.06 per share per quarter.

As we potentially approach a bear market and continue to navigate the COVID-19 pandemic, Johnson & Johnson has positioned itself as a lucrative investment due to its ability to deliver consistent revenue growth and bottom line earnings across all types of economic conditions. Its business model rewards investors for their ability to buy and hold. Regardless of what happens to the company’s share price, you can count on your quarterly dividend.

This article represents the opinion of the writer, who may disagree with the Motley Fool premium advice service’s “official” recommendation position. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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