2 Magnificent Dividend Stocks That Could Deliver a Lifetime of Passive Income

High-quality dividend stocks are always worth loading up on. This is doubly true for companies that offer shareholders an attractive mix of reliable income and reasonable levels of growth. Nonetheless, this year hasn’t been kind to most large-cap dividend stocks. With risk-free assets, like the 10-year Treasury note, offering a near 5% yield, dividend stocks have generally underperformed growth plays in 2023. The graph below lays this point bare:

VIG Total Return Level data by YCharts.
With the Federal Reserve likely to pivot on interest rates in 2024, though, these out-of-favor equities could be poised for a comeback next year. After all, several blue chip dividend stocks are presently trading at rock-bottom valuations despite their superb free cash flows, strong balance sheets, and bright long-term outlooks. Here is a look at two high-quality dividend stocks that screen as significantly undervalued.
An oversold big pharma stock
Pfizer (PFE 1.85%) is going through a rough patch. Slumping sales of its COVID-19 products have caused the drugmaker’s shares to plunge by over 40.7% year to date. But it isn’t all doom and gloom at the global pharma giant.
Over the past few years, Pfizer has steadily tacked on several major growth assets, such as Oxbryta for sickle cell disease, Velsipity for ulcerative colitis, and Nurtec ODT for migraine headaches. What’s more, the drugmaker’s internal pipeline has recently hit on a couple of potential gems, like the respiratory syncytial virus vaccine Abrysvo. Its mid-stage weight loss/diabetes drug danuglipron could also be a future megablockbuster.

These newer growth products — combined with potent revenue generators, like the blood thinner Eliquis — are forecasted to return Pfizer to solid levels of top- and bottom-line growth in 2024. Speaking to this point, Pfizer’s stock is presently trading at only 9.27 times projected earnings, among the lowest valuations within its big pharma peer group.
On the dividend side, the drugmaker’s annualized yield has ballooned 5.3% this year, which is among the highest within the pharmaceutical industry. Moreover, Pfizer has doled out quarterly distributions to shareholders for an impressive 340 straight quarters, underscoring management’s commitment to rewarding loyal shareholders.
In all, Pfizer has a proven track record as a reliable income vehicle, and its shares are incredibly cheap at the moment. That’s a compelling mix for investors on the hunt for steady income.
An undervalued Dividend King
Johnson & Johnson (JNJ -0.36%) is another deeply undervalued healthcare stock that screens as a top buy for income investors right now. The company’s shares have dropped by over 13% year to date in response to litigation concerns, but its underlying business is humming along just fine.

In the third quarter of 2023, J&J raked in a massive $21.4 billion in revenue, driven by rising pharmaceutical and medtech sales during the three-month period. Its shares are also incredibly cheap from a historical perspective at 13.8 times projected earnings. After all, J&J’s stock has generally traded north of 20 times forward earnings over the last two decades.
The best part of this story is J&J’s incredible dividend program. The company has raised its payout for 61 consecutive years — one of the longest streaks in the entire healthcare sector. This six-decade streak also makes the healthcare conglomerate a Dividend King. Lastly, J&J stock also sports an above-average yield of 3.15% at current levels. Overall, this blue chip healthcare stock screens as an outstanding pick for income investors.

George Budwell has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer, Vanguard Index Funds-Vanguard Growth ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.


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