Dividend stocks, particularly those that pay dividends consistently, are considered defensive stocks. These are stocks that typically perform well during economic downturns. These businesses typically operate in industries that provide essential goods or services, which means that consumers continue to spend money on them regardless of the state of the economy. 

Here are five defensive dividend stocks that may help you build a strong portfolio.

Dividend Stock #1: Johnson & Johnson

Founded in 1886, Johnson & Johnson (JNJ), has expanded into a global healthcare powerhouse with operations in more than 60 countries. The company is divided into three major segments: pharmaceuticals, medical technology (formerly medical devices), and consumer health. This diversification across key healthcare sectors helps to protect the company from volatility in any single segment. 

Valued at $367.9 billion, JNJ stock has gained 5.5% year-to-date, compared to the overall market gain of 0.6%

J&J pays a forward dividend yield of 3.4%, which is significantly higher than the healthcare sector average of 1.58%. Furthermore, the forward payout ratio (the percentage of earnings paid out as dividends) of 46.8% indicates that the company’s earnings can support dividend payments. A low dividend payout ratio indicates that dividends are sustainable and that the company has saved enough money to reinvest in the business.

In April, J&J increased its quarterly dividend by 4.8%, marking the 63rd consecutive year of dividend growth. Its status as a Dividend King, with over 60 years of consecutive dividend increases, demonstrates its commitment to returning capital to shareholders. In the first quarter, the company generated $3.4 billion in free cash flow and paid out $3 billion in dividends.  Analysts project Johnson & Johnson’s earnings to grow by 6.3% in 2025 and 4.6% in 2026. 

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 $169.39, which is nearly 12% above current levels.

Dividend Stock #2: Procter & Gamble Company

Procter & Gamble (PG) operates in more than 180 countries, providing everyday products in categories such as healthcare, grooming, beauty, fabric and home care, and baby and feminine care. Tide, Pampers, Gillette, Head & Shoulders, and Crest are among its well-known brands, which consumers rely on regardless of economic conditions.

Valued at $388.8 billion, P&G stock has dipped 0.3% year-to-date.

P&G is also a Dividend King, having increased its dividend for 69 consecutive years, with the most recent 5% increase in April. P&G’s annualized forward dividend yield is 2.5%, while the consumer staples sector average is 1.89%. Additionally, P&G’s forward payout ratio is a reasonable 60.4%. Analysts expect that earnings will rise by 2.9% in fiscal 2025, followed by another 3.6% in fiscal 2026. 

On Wall Street, Procter & Gamble stock is rated a “Moderate Buy.”  Of the 25 analysts who cover the stock, 13 rate it as “Strong Buy,” three as “Moderate Buy,” and nine as “Hold.” The average target price for PG stock is $174.35, or 5.1% higher than current levels. 

Dividend Stock #3: PepsiCo

PepsiCo (PEP) is one of the world’s largest consumer goods companies, with a strong portfolio that includes beverages and packaged foods. PepsiCo is a Dividend King, having increased its dividend for the past 53 years, with the most recent 5% increase in May.

Valued at $177.3 billion, PepsiCo stock has fallen 14.3% year-to-date.

PepsiCo maintains a healthy payout ratio of 68%. It also has an attractive forward dividend yield of 4.4%, compared to the consumer staples sector average of 1.89%. 

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 $147.63, which is 14.1% above its current levels. 

Dividend Stock #4: AbbVie 

Valued at $323.7 billion, AbbVie (ABBV) is a global biopharmaceutical company that discovers, develops, and markets advanced therapies in immunology, oncology, neuroscience, and other fields. It is well-known for its diverse product portfolio, consistent dividend payments, and steady cash flow. It has consistently paid and increased dividends over the last 53 years.

AbbVie stock is up 4.3% year-to-date, compared to the broader market. 

AbbVie’s financial performance remained strong, with an 8.4% increase in revenue and a 6.5% increase in adjusted earnings in the first quarter. Its balance sheet is robust, giving confidence in both its growth potential and dividend safety. AbbVie’s forward dividend yield is 3.5%, compared to the healthcare sector average of 1.58%. The forward payout ratio of 46.8% is also sustainable, with room for dividend growth.

Overall, on Wall Street, AbbVie stock is a “Moderate Buy.” Out of the 27 analysts covering the stock, 14 have a “Strong Buy," two suggest a “Moderate Buy," and 11 recommend a “Hold” rating. The mean target price for ABBV is $209.68, which is 14.4% above its current levels. 

Dividend Stock #5: Realty Income

Realty Income (O) is a real estate investment trust (REIT) that leases out freestanding, single-tenant commercial properties to diversified tenants under long-term net lease agreements, earning rental income in return. It has also earned the title of “The Monthly Dividend Company” for consistently providing monthly income to shareholders.

O stock has gained 4.9% year-to-date, outperforming the overall market.

Realty Income has an appealing forward dividend yield of 5.8%, which is higher than the real estate sector average of 4.5%.  Furthermore, as a REIT, the company is legally bound to pay 90% of its taxable income, or AFFO (adjusted funds from operations), as dividends. The company’s AFFO dividend payout ratio of 75.5% is slightly higher, but it appears sustainable, given that dividends have been paid and increased for the past 30 years in a row. 

Overall, on Wall Street, Realty Income stock is a “Moderate Buy.” Out of the 23 analysts that cover the stock, five rate it a “Strong Buy,” one rates it a “Moderate Buy,” and 17 rate it a “Hold.” The mean target price for the stock is $60.81, which is 9.5% above current levels. 

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. For more information please view the Barchart Disclosure Policy here.