NEW YORK ( TheStreet) -- October is here, but before the fall festivals and pumpkin pie, it's time to take a fresh look at investment portfolios. Dividend stocks are a popular option when considering additions to a portfolio. The right choices can lead to steady income. Tha's good in good times and bad. Below is a list of three strong dividend stocks. Caterpillar (CAT) , Microsoft (MSFT) and Johnson & Johnson (JNJ) are industry leaders that should continue to post consistently solid results.
At a five-year high dividend yield of 4.32%, Caterpillar's stock is probably one of the most attractive income-generators on the market today.
Given it's long history and strong brand, the long-term potential of this company shouldn't worry you. In fact, it recently announced its largest oil and gas -related order in its history, with plans to deliver 39 natural gas compression engines.
To be sure, in late September, the company announced the layoff of 10,000 workers due to reduced demand. Caterpillar hopes to save $1.5 billion in operating costs. The the stock price has also languished over the first three quarters of this year. But a 9% rise in share price this quarter shows all the right signs of a healthy recovery.
The company is also trading at a P/E of 12 while other industrial equipment makers Illinois Tool Works (ITW) and ABB (ABB) are trading at more than 16 times earnings, and offer less than a 3% dividend yield to boot. It's a no-brainer to consider this dividend leader that has been paying cash dividend since its formation in 1925 (Here's a list of other dividend stocks offering 11% yields, almost entirely tax-free).
The technology giant has rarely disappointed dividend investors and now offers a strong 3.06% yield.
It's been a decent year for Microsoft so far. A new CEO at the helm, a successful new product in Xbox One, and a gradual but relevant move towards Cloud-based software have given the company a boost.
Windows revenue fell in the June quarter. But Xbox and Bing search engine ad revenue grew 27% and 21% respectively, and commerical cloud revenue skyrocketed 88%. A positive market response to Surface Book offers one more reason to expect continued solid results.
Last month, Microsoft announced a 16% increase in its dividend compared to the 11% increase last year. The only concern at this point should be a relatively expensive valuation of 32 times earnings for this mature company, while the industry trades closer to 25 times.
Johnson & Johnson
The gold standard in the pharmaceutical industry, Johnson & Johnson has delivered 31 consecutive years of adjusted earnings growth for investors. Perhaps more impressively, it's also managed to raise its dividend for 53 consecutive years.
At a strong dividend yield of 3.15%, Johnson & Johnson is one of safest options on the market. It possesses an enormous portfolio of diversified businesses and products with 265 different operations across 60 nations contributing to its top and bottom lines.
While 18 out of 19 analysts rate the company as "Buy" or "Hold," experts argue the company's huge size is its biggest challenge. However given its history of incremental dividend growth, strategic and geographic diversification, and the long-term sustainability of its industry, Johnson & Johnson shares should continue to deliver a secure stream of income for decades.
Looking for more dependable dividend payers? Check out this list.