If history is any teacher, the best thing you can do with your money is buy dividend stocks. Numerous studies underscore the idea that dividend stocks outperform non-paying ones by a wide margin.

J.P. Morgan Asset Management found stocks that initiated and then raised their payouts over a 40-year period between 1972 and 2012 returned an average of 9.5% annually, versus just 1.6% non-dividend-paying stocks. 

24/7 Wall St. Key Points:

• Dividend stocks have been the one of the best ways to make money in the stock market for 100 years.
• Dividend Kings are companies that have raised their payouts for 50-plus years and these two blue-chip stocks represent some of the best dividend stock-buying opportunities.
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks“ now.

Similarly, the asset managers at Hartford Funds similarly found that dividends contributed 34% to the total return of the benchmark S&P 500 going all the way back to 1930. Moreover, dividend stocks never had a single decade where they lost money.

Companies that have raised their dividends every year for 50 or more years are called Dividend Kings. They are a rare and select group of companies. Only 51 stocks out of the thousands that trade on the market currently qualify for the list.

While most are large cap stocks with valuations between $10 billion and $200 billion, most companies have less than a $100 billion market capitalization and just over one-fifth the total (11) are mid-cap stocks. Nine stocks, or 18% of the dividend royalty, are small-caps.

Most Dividend Kings tend to be consumer-facing companies or industrial stocks, but a good many (9) are utilities. That should not be too surprising as utility stocks were long considered widows-and-orphans stocks because of the regularity and consistency of their dividend payments.

Below are two monarchs that are best suited to reign over your portfolio kingdom in 2025.

PepsiCo (PEP)

Beverage giant PepsiCo (NASDAQ:PEP) is the first Dividend King to buy for 2025. Its stock has been largely flat for the past few years, trading in a band between $165 per share and $175 per share. At the end of the day it hadn’t gone anywhere until this past summer when it started heading south. It ended 2024 down 10% and now, at $152 per share, trades at a level it hasn’t seen since 2021.

Pepsi’s dividend yields an attractive 3.6% annually and it has grown the payout predictably and reliably at an 8% compound annual growth rate over the past decade. That’s a solid performance for a business as mature as this blue-chip stock. It has raised its dividend for 52 consecutive years and the free cash flow it produces covers its dividend payments.

Earnings are expected to grow 8% annually going forward on a currency-adjusted basis as it continues to invest in its food business. Pepsi generates most of its revenue (59%) from food and in November said it was acquiring the remaining stakes in two dips and spreads businesses it had an ownership interest in. Frito-Lay, of course, is its biggest food operation.

Inflation has hurt its growth, and after three years of double-digit growth in Frito-Lay, there was a bit of normalization at play in the slowdown. Pepsi expects the business to remain healthy, though, and pick up once again as consumer’s gain strength.

In short, you’re getting very discounted, but solid consumer stalwart stock that should reward patient investors well in the years to come.

Johnson & Johnson (JNJ)

The second Dividend King to buy is Johnson & Johnson (NYSE:JNJ). It’s another top blue-chip pick that traded sideways for several years before getting beaten down in 2024. It ended the year down 8%, which has pushed its dividend yield to an eye-catching 3.4%. It’s one of the healthcare company’s highest starting yields ever. J&J has raised its payout for 62 consecutive years.

Part of its weakness comes from the incoming administration and the selection of Robert F. Kennedy Jr. to head of Health & Human Services. His mantra of “make America healthy again” has created uncertainty over just how he will seek to change the debate over food, healthcare companies, and pharmaceuticals.

Yet this is just fear of the unknown. Johnson & Johnson operates in a defensive industry where demand remains relatively stable, even during economic downturns. People need their medications, medical devices, and consumer health products regardless of the state of the economy. JNJ stock offers relative stability during market volatility.

The healthcare stock also boasts a strong balance sheet and consistent cash flow generation. It generates $16 billion in free cash flow each year and plans on directing much of that money into further research and development. Combined, it makes Johnson & Johnson a discounted stock worth buying today.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.