Investors will often debate what makes a good dividend stock. For some, it’s all about the dividend yield. Others highlight a company’s dividend growth track record.
The data suggests the sweet spot is right in the middle. Over the last 50 years, S&P 500 companies that increased their dividends delivered a 10.2% average annual return, while those with no change in their dividend policy (often higher-yielding stocks) returned 6.8% annually, according to data from Ned Davis Research and Hartford Funds. The data also indicated that companies with higher dividend payout ratios (typically those with higher yields) outperformed the market more often than their stingier counterparts.
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Here are a couple of healthcare stocks that deliver both yield and dividend growth.
Johnson & Johnson (NYSE: JNJ) currently has a dividend yield of 2.2%. That’s nearly double the S&P 500‘s dividend yield of 1.2%. The healthcare giant also has a terrific record of increasing its dividend. Johnson & Johnson extended its growth streak to 63 consecutive years in 2025 when it raised its payout by another 4.8%. That qualifies it as a Dividend King, a company with 50 or more years of consecutive annual dividend increases.
The company backs its dividend with one of the healthiest financial profiles in the world. Johnson & Johnson has a pristine AAA bond rating, one of only two companies with a perfect credit rating. The company also generates substantial cash flows. It produced $20 billion in free cash flow last year, easily covering its $12.4 billion in dividends.
Johnson & Johnson’s strong financial profile enables it to invest heavily in its growth. It invested $14.7 billion in research and development (R&D) last year. It also closed its landmark $14.6 billion acquisition of Intra-Cellular Therapies to solidify its neuroscience leadership and $3.1 billion deal for Halda Therapeutics to revolutionize cancer treatment. These investments position the company to continue growing its earnings and dividends at healthy rates.
Medtronic (NYSE: MDT) has a 2.8% dividend yield. The medical technology company delivered its 48th consecutive annual dividend increase last year.
The company also has a healthy financial profile. It generated $5.2 billion in free cash flow during its 2025 fiscal year, easily covering the $3.6 billion in dividends it paid out. The medtech company also has a strong A-rated balance sheet.
Medtronic invests a considerable amount of money into R&D ($2.7 billion in its last fiscal year). It will also make tuck-in acquisitions that enhance its growth profile. The company recently agreed to acquire Cathworks for $585 million to bolster its interventional cardiology portfolio. Medtronic’s strong financial profile and growth investments should support its ability to continue increasing its high-yielding dividend.
Johnson & Johnson and Medtronic fit the bill as good dividend stocks. They pay high-yielding, steadily growing dividends. That makes them ideal dividend stocks to consider adding to your income portfolio.
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Matt DiLallo has positions in Johnson & Johnson and Medtronic. The Motley Fool recommends Johnson & Johnson and Medtronic. The Motley Fool has a disclosure policy.
What is Considered a Good Stock Dividend? 2 Healthcare Stocks That Fit the Bill. was originally published by The Motley Fool
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