Finding the right stocks for your portfolio isn't rocket science, but it does take time and research to understand and identify the companies that are the best use of your investing capital given your overarching portfolio goals.
While a volatile market continues to keep some investors on the sidelines, if you're putting your money into wonderful businesses in both good times and bad, you can prime your portfolio for more consistent returns over the long term.
If you have $1,000 to put into stocks now, here are two businesses to consider adding to your buy list.
1. Johnson & Johnson
Johnson & Johnson(NYSE: JNJ) has a lengthy history of delivering returns to shareholders over a wide range of markets and economic environments through its faithful dividend payments. The stock yields a dividend of around 3%, and the company has such an impressive track record of maintaining and raising its dividend that this will be its 60th consecutive year of doing so. The last five years alone have seen J&J's dividend jump by more than 25%.
The resilience of this dividend goes back to the established and storied group of businesses that Johnson & Johnson boasts -- namely, its pharmaceutical business, medical device business, and consumer health business. While the consumer health segment is about to be spun off into a separate, dividend-paying entity named Kenvue later this year, Johnson & Johnson will still retain the lion's share of control with an approximate voting power of 80% of all shares of common stock.
Management thinks the pharmaceutical business is on track to be worth $60 billion by the year 2025, while its medical device segment raked in $27 billion in sales in the full-year 2022 alone. The consumer health business has always been a slower-growing one due to the nature of the products and the margins involved, but it boasts names like Tylenol, Band-Aid, and Motrin among its long list of daily use brands.
Johnson & Johnson is also a highly profitable business. The company has seen its annual earnings rise 30% over the past decade alone. Its status as a long-standing dividend payer and a fixture in multiple segments of the fast-growing, largely non-cyclical healthcare industry make it a worthy contender for a long-term investor's portfolio.
2. Mastercard
Mastercard(NYSE: MA) may not be a name at the top of most investors' list of stocks to buy right now given the particular turmoil that the financial services industry has seen lately. But there are a few reasons this company warrants a long hard second look, even in the current volatile environment. For one, Mastercard isn't in the business of lending people money, and that's not how it derives its revenue or profits.
Instead, Mastercard makes its money based on fees assessed to the financial institutions that disburse its financial products, such as credit cards. These fees revolve around payment volume, so the more that people are spending, the more money Mastercard makes. Now, it would follow that in the event of a full-blown recession, payment volume could decline and the inverse would happen.
However, it's also a reality that people often tend to spend more using financial products like credit cards during recessionary periods when personal savings are constrained.
Beyond Mastercard's resilient business model, which has lent itself to a steady track record of revenue and profit generation (the company recorded revenue of $22 billion and profits of $10 billion in 2022), the financial services giant is also known for its habit of paying and raising its dividends. Mastercard's dividend yields a little less than 1% at the time of this writing, but investors who have stayed with the stock throughout the trailing decade have seen that dividend rise to the tune of 850% and experienced a total return of 615%.
The company also has a rock-solid balance sheet, closing out 2022 with cash and investments in the amount of $7.4 billion.
Mastercard's consistent history of paying and raising its dividend, and its position as one of the world's largest credit card payment processors, give it a resilience that can enable it to withstand any near-term economic storm, as it has many times in the past. For investors searching for a tried-and-true stock that can deliver stable, compounded returns over the long term, Mastercard looks like a no-brainer name to consider right now.
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Rachel Warren has positions in Johnson & Johnson. The Motley Fool has positions in and recommends Mastercard. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
