Broader equities have been fairly resilient this year. However, there remains a very real possibility that macroeconomic problems and geopolitical tensions will eventually lead to a market crash. One way to prepare for that is to invest in dividend stocks with strong underlying businesses. Here are two options investors should consider: Johnson & Johnson (NYSE: JNJ) and Amgen (NASDAQ: AMGN). Both of these dividend payers have outperformed the broader market this year, but can they keep going?
Image source: The Motley Fool.
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
1. Johnson & Johnson
Johnson & Johnson’s financial results have helped power its strong stock market performance this year. However, the company’s latest quarterly update was somewhat mixed. True, Johnson & Johnson’s revenue and earnings came in above expectations. The drugmaker even slightly raised its guidance for the fiscal year 2026.
But that was because of the company’s innovative medicines division. Johnson & Johnson’s medtech unit, particularly its cardiovascular segment, is running into some problems. One of the company’s products, the Impella heart pump, has faced lower demand due to questions surrounding its safety and efficacy — and in the U.S., it has been the subject of a Class 1 recall. Johnson & Johnson is working on these issues.
The company is running clinical trials it hopes will show the effectiveness of the Impella. A success here could improve the Impella’s prospects, but a clinical failure would be a setback for the company. So, will Johnson & Johnson maintain its recent momentum?
My view is that the company’s near-term outlook is somewhat uncertain, largely due to its medtech-related issues. But Johnson & Johnson’s long-term prospects remain intact. Here are four reasons why. First, the innovative medicines segment is only getting better. Johnson & Johnson has launched several new products in recent years, including ICOTYDE for plaque psoriasis, that could help drive strong sales growth over the medium term.
Second, Johnson & Johnson earned U.S. marketing authorization for its OTTAVA robotic-assisted surgery system earlier this year. This device could also become an important growth driver down the line. Third, the company has moved one step closer to putting its talc-based lawsuits behind it with a proposed $5.5 billion settlement. Lastly, there is the company’s outstanding track record of dividends.
Johnson & Johnson is a Dividend King, that is, a corporation with 50 or more years of consecutive annual payout increases (the company’s streak stands at 64). Johnson & Johnson’s dividend appears to be about as safe as they come, especially considering its AAA rating from S&P Global, the highest rating available. The stock may or may not perform well over the next year, but Johnson & Johnson is a great income stock for long-term investors.
2. Amgen
Amgen is performing well despite dealing with multiple headwinds. For instance, the company is facing regulatory pressure regarding Tavneos, a medicine for severe anti-neutrophil cytoplasmic autoantibody-associated vasculitis, which it acquired through its 2022 buyout of ChemoCentryx. The U.S. Food and Drug Administration is pushing to remove Tavneos from the market due to safety risks and insufficient evidence of efficacy. Elsewhere, Amgen lost U.S. patent exclusivity for denosumab, a medicine for some bone-related conditions, last year.
Denosumab was an important growth driver for Amgen, but the medicine’s sales are now falling sharply due to biosimilar competition. Even with these (and other) problems, Amgen’s financial results have been strong. Second-quarter revenue grew 10% year over year to $10.1 billion. However, there is a very real possibility that Amgen will succumb to near-term headwinds and see its stock price decline significantly.
Consider, for instance, that Tavneos generated $150 million in revenue in the second quarter. That’s only 1.5% of the company’s second-quarter sales. But Tavneos’ revenue grew 36% year over year and would be a decent contributor to top-line growth in the medium term, especially as older products lose patent exclusivity. Still, Amgen’s outlook for the next five years looks strong.
Several of the company’s growth drivers are performing very well and will help offset the loss of Tavneos (if it comes to that). The list includes Tezspire, an asthma medicine, and Tepezza, a drug approved to treat thyroid eye disease. Amgen could also earn approval for important new products over the next few years. Perhaps the company’s most promising candidate is MariTide, a GLP-1 medicine being investigated for weight loss and across obesity-related conditions.
MariTide could be administered monthly (or less frequently), offering a highly differentiated option relative to the current weight-loss market leaders. Amgen’s lineup and pipeline are both deep and can withstand regulatory setbacks and patent cliffs, as it has in recent years. Then there is the company’s dividend. Amgen has increased its payouts by 152% over the past decade and offers a forward yield of 2.3%, compared with the S&P 500‘s average of 1.1%. Amgen is another excellent income stock to buy and hold for the long term.
Should you buy stock in Johnson & Johnson right now?
Before you buy stock in Johnson & Johnson, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Johnson & Johnson wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $376,696!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,333,920!*
Now, it’s worth noting Stock Advisor’s total average return is 925% — a market-crushing outperformance compared to 212% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends Amgen. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
