There is no better way to create wealth than investing in stocks. Not gold, not bonds, not real estate. Over short periods of time, different asset classes might excel, but the long-term results prove that if you want to accumulate large amounts of wealth, stocks are the way to go. There are also great dividend stocks to buy in the current macro environment.
A 2020 Deutsche Bank (NYSE:DB) study found that over the past 100 years, equities beat gold by 5.6% per year, housing by 6.6%, Treasuries by 6.8%, and oil by 8.4% annually. In only two decades did stocks have negative returns: the Great Depression of the 1930s and the so-called “lost decade” of the 2000s when the Tech Wreck, 9/11, and the bursting housing bubble all conspired to sink the market. Stocks suffered negative returns of 0.5% and 0.9%, respectively.
However, the asset managers at Hartford Funds narrowed their focus to just dividend stocks on the S&P 500 and found they never had a losing decade. From the 1930s onward, they always generated positive returns, even during the Depression and the 2000s.
The key is to hold on through the turmoil. Whether it is stock market corrections or crashes, a bull market always follows a bear market. That’s because the downturns represent excellent opportunities to buy stocks on sale. And those companies will go on to roar ahead once more.
What follows are three terrific dividend stocks to buy on the dip each and every time.
Johnson & Johnson (JNJ)
Pharmaceutical giant Johnson & Johnson (NYSE:JNJ) possesses a number of qualities that put it above the average dividend stock. Because it is a healthcare stock, Johnson & Johnson operates in a defensive industry where demand remains relatively stable, even during economic downturns. People require pharmaceuticals, medical devices, and consumer health products regardless of the state of the economy. That stability provides a cushion during market volatility.
It’s a somewhat diversified business, too. Yes, Johnson & Johnson is a big pharma player, but it also operates in medical devices, and until recently, consumer health products. It spun off its consumer products business, Kenvue (NYSE:KVUE), into a standalone, publicly traded company, though it will remain a majority shareholder of the business.
Johnson & Johnson also boasts a strong balance sheet and consistent cash flow generation. It generates $16 billion in free cash flow each year. It plans on pouring more of that money into greater research and development.
This financial strength suggests the company has the capacity to continue paying dividends and weather market fluctuations. Johnson & Johnson has paid a cash dividend to shareholders every year since 1944. It has increased the payout for 60 consecutive years and it currently yields 2.9% annually making buying JNJ stock on the dip a smart move.
Coca-Cola (NYSE:KO) is a globally recognized beverage company known for its iconic soft drink brand. BrandFinance says Coke is “the world’s most valuable non-alcoholic drink“ with a brand worth $33.5 billion. That’s nearly twice PepsiCo‘s (NASDAQ:PEP) $18.3 billion brand value. That global reach and strong brand recognition contribute to its resilience and ability to maintain steady revenue streams, even during economic challenges.
While consumer tastes may evolve, Coca-Cola’s brand strength and diversified product portfolio, which includes water, juices, and other beverages, continue to produce substantial revenue. It generated $43 billion in sales last year and it’s up 5% so far this year.
Coke also has a track record of withstanding market volatility and economic fluctuations. Over the years, the company has demonstrated its ability to adapt to changing consumer preferences and market dynamics. It’s why there are so many strong beverage brands in its portfolio today. And because it makes affordable beverages, Coca-Cola is relatively recession-resistant. During economic downturns, consumers do cut back on discretionary spending, but they tend to continue purchasing everyday items like beverages.
Coca-Cola has a long history of rewarding shareholders with dividends, too. Its stock is a staple in many income-focused portfolios. When the stock price falls, the dividend yield (or the annual dividend payment divided by the stock price) increases, providing a higher income potential for investors who buy in at lower prices.
The company’s commitment to maintaining and growing its dividend, combined with its defensive industry, makes Coca-Cola a top beverage dividend stock and an excellent choice to buy on the dip.
Procter & Gamble (PG)
In that same vein, a consumer products company that can withstand a market correction is Procter & Gamble (NYSE:PG). It owns well-known brands like Crest, Charmin, Febreeze, Pampers, and Tide which are essential to everyday living. Household products and personal care items also tend to maintain stable demand regardless of economic conditions.
Because it is a market leader in the consumer goods industry, it benefits from economies of scale, distribution networks, and robust brand loyalty. This market leadership provides a competitive edge and the ability to effectively navigate a volatile market.
Procter & Gamble has what can be described as a “high-touch” relationship with American and global households. Its name brands possess the luxury of being associated with quality, consistency, and reliability. Consumers return to them again and again because virtually all of its products are consumables.
The consumer products leader also has an impressive dividend track record with a better than six-decade history of consecutive increases. That makes Procter & Gamble a Dividend Aristocrat. It has also paid a dividend every year since 1891, or some 132 years. The payout yields 2.6% annually. This makes it one of those dividend stocks to buy.
On the date of publication, Rich Duprey held a LONG position in JNJ, KO, and PG stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.