In the world of high dividend stocks, not all are created equal. Some pay out but rarely increase their dividends and can even suspend payments during tough times. However, there are companies that consistently raise their dividends, even during challenging periods—those are the ones dividend investors typically favor. Let’s take a closer look at two companies that embody this approach: Visa (NYSE: V) and Johnson & Johnson (NYSE: JNJ). These stocks might reach the $1 trillion market cap mark in about seven years.
Visa is a leading player in the financial services sector, and it looks like it won’t take them long to hit a $1 trillion valuation. A compound annual growth rate (CAGR) of just 7% is necessary, which is quite modest compared to overall stock trends. Visa is far from ordinary—it’s among the largest payment processors globally, earning a fee on every transaction made via debit or credit card.
With billions of cards in use and trillions in total payment volume, Visa boasts a solid operational framework that allows for steady growth in revenue, profits, and free cash flow.
The company has shared its successes with its shareholders since going public in 2008, with yearly dividend increases ever since. There are good indicators that this trend can continue. For one, Visa’s payout ratio is just under 24%, which is quite low, allowing room for future dividend hikes alongside other expenditures.
Moreover, the payment processing space is set for growth, particularly with the increasing shift away from cash and the boom in e-commerce, both of which will drive demand for Visa’s services. The outlook for Visa seems very positive over the next several years.
Turning to Johnson & Johnson, the company currently holds a market cap of around $530 billion, requiring a CAGR of approximately 9.5% to reach that $1 trillion goal in seven years. Although Johnson & Johnson has faced its share of hurdles recently, it’s equipped to navigate through. The healthcare giant has made strategic moves, such as divesting from its slower-growing consumer health segment, expanding its medical technology division, and placing a stronger focus on innovative medicines.
From my perspective, the impacts of these changes are just beginning. The company seems poised to introduce several new products in the coming years, which could lead to revenue growth, even amid challenges like impending patent expirations. An exciting area for them is robotic-assisted surgery; their device, Ottava, is nearing approval in the U.S.
Johnson & Johnson also has a strong track record as a dividend payer. It’s recognized as a Dividend King, having raised dividends for over 50 consecutive years. With a payout ratio of 46.59%, it still has ample room to grow its dividends sustainably.
Before delving into Visa stock, it’s worth considering some insights:
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Prosper Junior Bakiny has stakes in both Johnson & Johnson and Visa. The Motley Fool endorses both companies.
Dividend Growth Companies: 2 Stocks That Could Be Worth $1 Trillion in 7 Years
