With economic uncertainty looming in the second half of 2025, as well as lingering inflationary pressures and potential interest rate changes, investors are becoming more cautious about where to invest their money. Here’s where dividend stocks shine.
The most compelling ones are recession-proof businesses with long-term demand, strong balance sheets, and a consistent track record of rewarding shareholders. Here, we highlight two such recession-proof dividend stocks that not only provide consistent income, but also resilience during turbulent times.
Johnson & Johnson (JNJ), the global healthcare giant with a more-than-135-year legacy, continues to stand out for its diverse business model, consistent dividend history, and strong balance sheet. After it spun off its consumer division in 2023, Johnson & Johnson’s operations are now divided into two main business segments: innovative medicines (formerly pharmaceuticals) and MedTech (formerly medical devices).
Johnson & Johnson is a Dividend King, having increased its dividend for 63 straight years. The company’s forward dividend yield of 3.1% is comfortably higher than the 1.6% average for the healthcare sector. With a 45.8% payout ratio (the amount of earnings that can be paid as dividends), there is still plenty of room for future increases. A reasonable payout ratio allows a company to pay dividends while still having enough money to reinvest in the business. J&J raised its quarterly dividend by 4.8% in April to $1.30 per share, marking the 63rd dividend increase.
In the second quarter, Johnson & Johnson’s operational sales increased by 4.6% year over year, but adjusted earnings per share fell 1.8% to $2.77. The MedTech segment saw the highest (7.3%) increase in sales in the quarter. J&J is also leveraging Nvidia’s (NVDA) AI-powered platforms to help boost growth in its MedTech segment in the coming years.
At the end of the second quarter, J&J had $19 billion in cash and marketable securities and $32 billion in net debt. However, it generated $6 billion in free cash flow, which should help to effectively reduce its debt burden. In the second quarter, J&J returned $3.1 billion to shareholders through dividends.
Analysts project Johnson & Johnson’s earnings to grow by 8.8% in 2025 and 4.4% in 2026. JNJ stock is currently trading at 13 times forward estimated 2025 earnings, which is significantly lower than its five-year historical average price-earnings (P/E) ratio of 22.2x. This allows investors to buy a blue-chip, recession-proof dividend stock at a discount. Healthcare, unlike discretionary sectors, experiences consistent demand regardless of macroeconomic cycles. This makes J&J one of the few recession-resistant dividend stocks with both defensive strength and long-term growth prospects.
Overall, Wall Street rates JNJ stock as a “Moderate Buy.” Of the 23 analysts covering JNJ, nine rate it as a “Strong Buy,” two as a “Moderate Buy,” and 12 as a “Hold.” The mean target price for JNJ is $175.18, which is nearly 6.6% above current levels. The Street-high estimate for the stock is $190, which implies upside potential of 15.6% over the next 12 months.
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PepsiCo (PEP) is a consumer staples giant that owns a diverse portfolio of iconic food and beverage brands such as Pepsi, Lay’s, Gatorade, Tropicana, Doritos, Mountain Dew, and Quaker. PepsiCo has also earned the title of Dividend King. The company recently hiked its dividend by 5%, which marked its 53rd consecutive dividend increase. PepsiCo maintains a healthy payout ratio of 67%, leaving enough to reinvest in the business. The company also offers an attractive forward dividend yield of 3.9%, higher than the consumer staples sector average of 1.89%.
Despite economic pressures such as commodity inflation, shifting consumer habits, and geopolitical instability, PepsiCo has maintained consistent revenue growth. In the second quarter, organic revenue increased by 2.1%. Analysts predict that the company’s earnings will fall by 2% in 2025, before rising by 5.8% in 2026.
PepsiCo’s ability to pass on higher input costs to consumers without significant volume declines highlights the pricing power of its brand portfolio. Even in an inflationary environment, consumers continue to spend money on their favorite snacks and beverages, making PepsiCo a resilient business.
Overall, on Wall Street, PepsiCo stock is a “Moderate Buy.” Out of the 20 analysts covering the stock, six have a “Strong Buy,” 13 suggest a “Hold,” and one recommends a “Strong Sell” rating. The mean target price for PEP is $149.58, which is 5.6% above its current levels. The Street-high estimate for the stock is $169, which implies an upside potential of 19.3% over the next 12 months.
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On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
