2 Recession-Proof Dividend Stocks to Buy and Hold

In the ever-changing landscape of the stock market, finding reliable dividend stocks that can weather economic storms is crucial for long-term investors. As we approach the potential economic downturn in 2025, it's essential to identify companies that have proven their resilience during past recessions. Two such companies are Medtronic (MDT) and Johnson & Johnson (JNJ). These healthcare giants have demonstrated their ability to maintain and even increase their dividends during challenging economic times, making them excellent candidates for a buy-and-hold strategy.

Why Healthcare Stocks Are Recession-Proof

Healthcare stocks are often considered defensive investments because their products and services are essential, regardless of economic conditions. During a recession, people may cut back on discretionary spending, but they are less likely to forgo necessary medical treatments or medications. This makes healthcare stocks a reliable source of income, even during economic downturns.

Medtronic: A Leader in Medical Technology

Medtronic is one of the largest medical device companies in the world, with a diversified portfolio that spans diabetes care, cardiovascular health, medical surgical, and neuroscience. This diversification helps Medtronic weather economic downturns, as many of its products and services are essential and not easily cut from consumer spending. For example, Medtronic develops and markets products that help treat aneurysms, strokes, and hernias, and provides insulin pumps to diabetes patients. These are among the last things people will want to avoid spending money on if they can help it. This defensive nature of its business allowed Medtronic to maintain its dividend streak of 47 consecutive years of payout increases, even during the 2007-09 financial crisis.

Johnson & Johnson: A Diversified Healthcare Giant

Johnson & Johnson has a vast portfolio of drugs across several therapeutic areas, including immunology, oncology, infectious diseases, and neuroscience. The company's top-selling products, such as Tremfya, which treats several conditions, including ulcerative colitis and Crohn's disease, and Darzalex, a therapy for multiple myeloma, are essential for patients. Johnson & Johnson also has a robust medtech segment that helps diversify its business. This diversification and the essential nature of its products allowed Johnson & Johnson to maintain its dividend streak of 62 straight years of dividend growth, even during the 2007-09 financial crisis.

Strategies for Maintaining Dividends During Recessions

Both Medtronic and Johnson & Johnson have employed several strategies to maintain or even increase their dividends during challenging economic periods. These strategies include:

1. Diversified Product Portfolio: Both companies have a vast portfolio of products across various therapeutic areas, ensuring that they have multiple revenue streams even if one area is affected by the recession.
2. Strong Market Position: Both companies have deep, entrenched footprints in the industry, with strong relationships with patients, physicians, and third-party payers. This strong market position helps them maintain their market share even during economic downturns.
3. Strategic Investments: Both companies have made strategic investments that should pay off down the road. For example, Medtronic developed the Hugo system, a robot device that is in use in some countries and is still undergoing clinical trials in the U.S. Johnson & Johnson's grand entrance in this market should be through its Ottava system that is also in studies. This could represent important long-term tailwinds for these two companies, and there are others as well. Medtronic's diabetes care segment, particularly its series of insulin pumps, should be a key growth driver for the foreseeable future. Johnson & Johnson has developed newer medicines that will help drive top-line growth for years. That includes Carvykti, a cancer medicine that first earned approval in the U.S. in 2022. In 2024, Carvykti's revenue was $963 million, an increase of 92.7% compared to the previous fiscal year. These strategic investments and innovations help these companies to maintain or even increase their dividends during challenging periods.

Conclusion

In conclusion, Medtronic and Johnson & Johnson are two recession-proof dividend stocks that are well-positioned to weather economic downturns. Their diversified product portfolios, strong market positions, and strategic investments make them reliable sources of income for long-term investors. As we approach the potential economic downturn in 2025, these two companies are excellent candidates for a buy-and-hold strategy, offering both stability and growth potential.