Key Points
Johnson & Johnson has a historically high yield, and it is a Dividend King.
Medtronic is two years shy of Dividend King status and has a historically high yield.
Merck’s dividend has grown steadily, though not annually, for decades.
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Healthcare stocks aren’t exactly known for offering large yields, with the average healthcare stock at just 1.8% or so. You can do better than that and get reliable dividend stocks while you are at it. All you need to do is buy Johnson & Johnson (NYSE: JNJ), Medtronic (NYSE: MDT), and Merck (NYSE: MRK), and then hold them forever. Here’s what you need to know.
1. Johnson & Johnson is a Dividend King
When it comes to reliable dividend stocks, the highest honor that is bestowed on a company is the rank of Dividend King. A company has to increase its dividend annually for five decades to earn that title. Johnson & Johnson’s dividend streak is up to 63 years, which is the longest streak of any healthcare company. The dividend yield is an attractive 3.1%.
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That yield is not only well above the healthcare average, it’s also toward the high end of Johnson & Johnson’s historical yield range. Historically speaking, the stock looks like it is on sale despite what is a very impressive and well-run business. The company is an industry-leading pharmaceutical and medical device maker.
That said, there’s a bit of uncertainty here today. Johnson & Johnson is facing a fairly large class action lawsuit around talcum powder it sold. It will likely survive through this, but the overhang of the suit could be a drag for a while. If that doesn’t bother you, though, jump in. One thousand dollars will get you around five shares of Johnson & Johnson stock.
Image source: Getty Images.
2. Medtronic is two years shy of being a Dividend King
Medtronic has increased its dividend annually for 48 consecutive years. That’s not as good as the streak Johnson & Johnson has built, but it is still pretty darn impressive. Medtronic is focused exclusively on medical devices, and it has a dividend yield of roughly 3.1% today. Like Johnson & Johnson, Medtronic is one of the largest players in the sectors it serves.
Medtronic’s dividend yield also happens to be historically high right now. Unlike with Johnson & Johnson, however, the problems here don’t involve a large class action lawsuit. Medtronic’s growth has slowed down, thanks at least in part to a period in which few new products were being introduced. Management is working to fix the issue. For starters, new products are again starting to come to market (innovation is lumpy, so this isn’t shocking). The company is also attempting to refocus around its most desirable businesses.
The end result is likely to be a more profitable and faster-growing company. But for now, Wall Street remains in a “show me” mood, which is an opportunity for buy-and-hold dividend investors to jump aboard an industry-leading medical device maker while it has a historically attractive dividend yield. A $1K investment will net you roughly 10 shares of Medtronic.
3. Merck’s dividend record is good, but not kingly
Merck is one of the largest pharmaceutical companies on the planet. As noted, innovation is lumpy, and that’s particularly true when it comes to drugs. Add in the fact that drug patents only allow exclusivity for so long, and there’s always a cliff somewhere down the line for drugmakers with blockbuster products. This is the nature of Merck’s business, and there’s nothing that can be done about it. Sometimes it just takes a little bit longer than hoped to find a new drug to replace the ones that are losing patent protections.
What’s actually impressive is that, despite the ups and downs, Merck has managed to keep its dividend growing over time. That hasn’t happened every single year — there have been some lengthy periods when the dividend was static. But generally higher over time is still quite attractive when you add it to a historically high 3.9% or so dividend yield.
There’s no telling when Merck will find its next blockbuster. It may develop it in-house, or it might buy a company to acquire an attractive drug. But history suggests that buying and holding this giant drugmaker has been a win for dividend lovers with a holding period of “forever.” Investing $1,000 here will allow you to buy about 11 shares of Merck.
What are you really buying?
Johnson & Johnson, Medtronic, and Merck are all high-yield healthcare stocks with strong dividend records. But that’s not really all you’re buying here. The truth is, healthcare is a very complex sector, and these three industry giants are standout businesses. You may not be expert enough in healthcare to keep up with the innovation in the industry, but these three companies are experts.
In other words, you’re getting well-run businesses that are doing the heavy lifting in the healthcare sector so you don’t have to be an expert. Along with that, you’re getting attractive dividend yields backed by solid dividend histories.
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Reuben Gregg Brewer has positions in Medtronic. The Motley Fool has positions in and recommends Merck. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.
