The S&P 500 is up almost 10% this year, as a dovish Fed and tech sector enthusiasm brighten the outlook for all stocks, including some of the favorite long-term stocks that have been ignored amidst the growth stock rally.
The stocks picked on this list are all dividend payers. Two stocks are Dividend Kings, and one is a Dividend Aristocrat. There are very few stocks in the world that can boast these dividend credentials. Plus all three are diversified legacy companies, which means less volatility and risk.
Each pick is also a favorite of Wall Street among long-term stocks, offering buy ratings despite being legacy enterprises. In addition, these favorite long-term stocks span a wide range of industries, including heavy machinery, beverages, and pharmaceuticals. They also offer capital appreciation. Two picks boast double-digit five-year returns, and one offers a triple-digit one, which means if you want to sell the stock at a future date, there is a healthy capital return waiting for you as well.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is a prominent member of the Dividend Kings, having raised its dividends for 61 consecutive years. Due to its long history of dividend payments, JNJ is among Wall Street’s favorite long-term stocks. JNJ stock commands a consensus rating of a ‘Moderate Buy’ with an upside potential of approximately 15%.
The upside potential is significant since we are discussing an established pharmaceutical legacy company. More than capital appreciation, investors look for dividend payments from JNJ. However, Johnson & Johnson is much more focused after spinning off its consumer healthcare division (now Kenvue). Post-spinoff, JNJ focuses on pharmaceuticals and medical devices segments, hoping for better margins and profitability.
The move seems to be working, with Johnson & Johnson edging out earnings and revenue estimates in its Q4’23 results, driven by growth in its Innovative Medicine and MedTech segments. The Innovative Medicines division, which includes important pharmaceutical companies like ERLEADA and DARZALEX, experienced a 4.8% operating revenue increase for the whole year.
The purchase of Abiomed contributed to the robust expansion of the MedTech sector, focused on cutting-edge surgical goods and electrophysiology. Strong earnings and an AAA credit rating enhance the company’s appeal, further boosted by acquiring Ambrx to strengthen its oncology pipeline.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) is another perennial great income pick among Wall Street’s favorite long-term stocks. It holds a ‘Moderate Buy’ rating and has the potential for approximately an 11% upside from the current price. Based on 15 ratings, the consensus is made up of 11 “Buy” recommendations. It’s unsurprising given Coca-Cola’s excellent post-pandemic recovery, worldwide brand appeal, healthy financial results, and extensive market share.
When picking Coca-Cola, the most appealing element is the seemingly inelastic demand for its products. Despite higher pricing strategies and robust organic growth, which was 12% in the latest quarter, the underlying business is strong.
For 2024, Coca-Cola has forecasted 6% to 7% growth in organic sales and a 4% to 5% increase in comparable EPS, ahead of analyst estimates of 5.9%, despite the fact Coke expects negative effects from foreign exchange rates on earnings and revenue.
Adding to robust financials, Coke is more than just a cola company. For instance, it spent $5.6 billion to acquire total control over Bodyarmor, a manufacturer of sports drinks. With a portfolio that includes anything from hot and cold coffee beverages to a range of health drinks, the beverage giant is in a great position strategically.
Finally, with a yield of 3.19% and 62 consecutive annual dividend increases, Coke is one of the best dividend stocks on the market.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) is back after hitting a record high following robust Q4 earnings, thanks to a construction boom. Management highlighted record full-year sales and revenues and adjusted profit per share as analyst expectations fell by the wayside.
The performance comes despite macroeconomic uncertainties, particularly in China, highlighting the company’s robust, diversified operating model. Furthermore, despite operating in the cyclical industry of construction and mining equipment, it has consistently returned cash to shareholders. Hiking dividends consecutively for 31 years earned it a place at the table among top Dividend Aristocrats.
Going forward, given that manufacturing is a major subject in the U.S. presidential election, I anticipate CAT will build on its record performance. Construction is promoted regardless of party affiliation; the $1.2 trillion infrastructure plan is one example. If regulation continues to support the sector, CAT stock will benefit the most, considering its competitive advantages.
The consensus on CAT stock is a “Moderate Buy” based on the ratings of 18 analysts.
On the publication date, Faizan Farooque did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.