When investors think about how they want to structure their portfolios in this current environment, a few things may come to mind. Investors who have previously benefited from ramping up exposure to the fastest-growing companies (that may not be profitable yet) have seen their returns dwindle. Overall, shifting market dynamics appear to be benefiting investors who are willing to add more exposure to defensive companies with solid balance sheets.
Many top dividend-paying companies in the blue chip space are getting more attention than they have in some time. That’s due in part to these companies’ yields alone (which should get more attractive, if interest rates do decline as many expect). But beyond these yields, companies that pay dividends and increase them over time tend to signal that their balance sheet strength is expected to continue for a long time to come.
Key Points
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Many investors are looking to tilt their portfolios toward more defensive companies with rock-solid balance sheets.
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The following three dividend all-stars provide just the kind of exposure those looking to ride out future volatility may want to consider.
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The three dividend all-stars I’m going to discuss below certainly have the scale and upside potential many long-term investors are after. Here’s why I think these companies are worth considering right now.
Alphabet (GOOG)
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Alphabet (NASDAQ:GOOG) is a Magnificent Seven giant that’s made a big pivot over the course of the past year. In fact, 2024 was the first year this tech giant decided to pay a dividend, shifting its focus toward returning a more significant percentage of its earnings to investors. For those with a long-term investing time horizon, this is a great move and one which invites GOOG stock into many dividend investing portfolios as a result.
Now, given the fact that Alphabet hasn’t had a few years under its belt to up the ante in terms of its dividend distribution, the stock’s current yield sits at around 0.5%. Much of this has to do with the stock’s recent run-up in valuation, so investors can’t generally complain – Alphabet has clearly been moving in the right direction.
And while concerns around the future of the company’s core search business (and how it may be disrupted by AI in the future) remain, it’s clear that Alphabet’s heavy investments in AI and its leadership on this front have been more of a tailwind than a headwind thus far. With a very low payout ratio and plenty of room to grow its dividend yields s the company’s earnings continue to surge, this is a top future dividend growth stock I think investors would do well to consider at current levels.
Fortis (FTS)
One of the top Canadian dividend stocks I continue to pound the table on is utility giant Fortis (NYSE:FTS). That view has mainly been driven by the fact that Fortis is a dividend king, having raised its dividend each and every year for more than five decades straight.
Such a track record should not go unnoticed by dividend investors looking for growth on the yield front. The company’s rock-solid business model, revolving around providing electricity and natural gas utility services to a range of commercial and residential clients in North America, provides rock-solid cash flow growth the company (and investors) can rely upon. And with a $26 billion five-year capital program already priced into the company’s forward projections, its ability to continue to reinvest in its core business while providing even greater capital to shareholders remains a key selling feature I think is worth paying attention to.
The company’s upcoming Q1 earnings are set to be released later this month, so we’ll have to wait to see how the company’s commentary on this current environment may have shifted over the course of the past three months. But given the stability of this company’s underlying business and strong expected investor demand, I see no reason why this stock can’t continue to outperform over the long haul.
Johnson & Johnson (JNJ)
Rounding out this list of dividend all-stars to consider buying is none other than blue chip giant Johnson & Johnson (NYSE:JNJ). The company’s focus on growing organically and via strategic pipeline acquisitions has worked out well for investors, with the company’s stock price remaining relatively stable over time.
For those looking to simply preserve capital, that’s been a great thing. But overall, there’s plenty of investors out there that would argue that a cumulative 5% capital appreciation return over the past five years (outside of the company’s dividend yield of 3.3%) isn’t enough of a return to warrant investing in this relatively slow-growth name.
That may certainly be true in times when growth stocks are soaring. But if we do indeed enter a period of time in which investors seek greater defensiveness, this is a top stock I think has the potential to generate much more substantial investor interest.
I expect mid-single-digit growth on the top and bottom line for the foreseeable future. For those looking to lock in a 3.3% yield and ride out whatever volatility is ahead, that’s not a bad bargain over the coming year or two.
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