3 High Yielding Dividend Stocks to Buy and Hold Forever

The recent stock market selloff has some investors worried about their investments and even the overall health of the US economy. But over the course of many people’s investing lives, markets will sometimes rise and sometimes fall, and changes can happen quite quickly. If recent volatility has you looking for more stable investments, consider some established cash-generating companies that have a long history of paying dividends. Here are three you can probably buy and keep forever.

Supported by family

Ford Motor Company (F 3.69%) has one of the richest histories in the automotive industry, but currently faces numerous challenges. The company is struggling in China. It works to improve vehicle quality, leading the US industry in recalls for three consecutive years. And it loses billions annually with its electric vehicle (EV) division. But those challenges have given investors an opportunity to buy Ford stock at a price-to-earnings ratio of 10 times, with a dividend yield exceeding 6.1 percent at recent prices.

Despite its challenges, Ford has an unblemished balance sheet, with plenty of cash flow thanks to its gas-powered trucks, SUVs and vans. The automaker also has $27 billion in cash, with about $45 billion in cash. That’s a lot of capital to invest in long-term growth strategies and returning shareholder value.

Ford has pledged to return 40% to 50% of free cash flow to investors. Unlike many companies that do both share buybacks and dividends, Ford will almost certainly offer those profits exclusively in the form of dividends. That’s because the Ford family owns a separate class of shares that come with 40% voting power, as well as the dividend, which the family is known to love. Because of this, expect Ford to continue to focus on its healthy dividend.

Take a look at the chart below to see the difference in the value of owning Ford stock and reinvesting the dividend, compared to just the stock price gains.

F data by YCharts.

Adaptation to smoke-free

Amid the decline of traditional cigarettes, Altria Group (MO 0.84%) focuses on providing adult smokers with a variety of smokeless substitutes that include e-vapor, heated tobacco and oral tobacco. It’s a transition that won’t be easy or cheap, especially since investors have grown accustomed to cigarettes over the decades, but it’s necessary for future growth. Altria already has a broad portfolio of smokeless products, including NJOY and LLC (which is currently the only e-vapor manufacturer to receive market clearance from the US Food and Drug Administration).

Investors shouldn’t worry about the decline of cigarettes just yet, at least when it comes to paying dividends. Last year, Altria paid out $6.8 billion in dividends and spent another $1 billion on share buybacks. It further reduced its debt-to-asset ratio and generated about $9 billion in free cash flow to cover it all.

As the company adapts to changing consumer preferences, what hasn’t changed for Altria Group investors is its stunning dividend yield, recently 7.9%. And for investors worried about the U.S. economy, rest assured that Altria’s business does well during recessionary times, as people buy tobacco products regardless of economic uncertainty.

Altria is not a growth stock and is in the midst of a major smoke-free transition, but it will remain one of the best dividend stocks for the foreseeable future.

The healthcare juggernaut

Johnson & Johnson (JNJ 0.83%) has proven to be a strong, consistent and sustainable business over the decades and the company continues to evolve. Consider that it has 25 platforms or products that generate more than $1 billion in sales annually, and that 65% of its sales come from markets in which it is #1 or #2 globally. Just last year, J&J spun off its consumer health business to focus on medical devices and innovative drugs to boost its growth rate.

When it comes to dividends, the company doesn’t play around. It has recorded more than 60 consecutive years of dividend increases and in the last five years has returned more than 60% of its free cash flow to shareholders through dividends and share buybacks – its forward dividend yield exceeds 3%.

J&J is focused on accelerating growth, returns massive value to shareholders and boasts a diverse product portfolio, so what’s the problem? Currently, the biggest downside to owning this stock is the uncertainty that comes with lawsuits. In May, J&J announced its third attempt to fix problems with its talc-based processes, and if it can finally fix the problem, it will be a boost for the stock. Longer term, however, investors will still be talking about J&J’s steady and growing dividend in 10 years, and likely won’t be discussing lawsuits in 2024.

Conclusion

Ultimately, while all three of these companies face some challenges, investors can rest assured that they can reap the rewards of dividends while waiting for the companies to overcome their challenges and continue to thrive. Ford, Altria Group and Johnson & Johnson will continue to offer passive income for years, helping investors sleep better at night, even during economic downturns.