Meet the Dividend King With a Higher Credit Rating Than the U.S. Government

We live in pretty volatile times marked by macroeconomic conflicts and worsening inflation, among other things. Equity markets have fared well this year despite these challenges, but it's always a good idea to prepare for market downturns by investing in robust companies that can navigate any environment. One top stock to consider investing in right now to stabilize a well-diversified portfolio is Johnson & Johnson (NYSE: JNJ), a leading healthcare player. Let's get into why the drugmaker is such an attractive pick in the current landscape.

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It can weather every storm

Several aspects of Johnson & Johnson's business make it an outstanding stock to own during a market crash, an economic downturn, or both. Let's consider three of them. First, Johnson & Johnson sells essential products that people depend on regardless of economic conditions, including pharmaceutical drugs and medical devices. No one wants to stop taking lifesaving medicines when the going gets rough. And because third-party payers help foot much of the bill for patients, many can still afford to take their meds when the purse strings tighten. Demand for the procedures that Johnson & Johnson helps physicians perform with its devices also tends to remain high across the economic cycle.

Crucially, Johnson & Johnson is far more than a typical healthcare company that can withstand downturns because its products remain in high demand. It is one of the more diversified players in the sector. The drugmaker's pharmaceutical portfolio spans several categories. We can say the same about its medtech division. And Johnson & Johnson also has a deep pipeline that allows it to score regular brand-new approvals or label expansions. Second, Johnson & Johnson has a rock-solid balance sheet.

Perhaps one of the best pieces of evidence for that is the company's AAA credit rating from S&P Global. Not only is it higher than that of the U.S. Government, but it is also the highest available. So, no matter the crisis, it's more than likely that Johnson & Johnson will be able to take care of its obligations. Third, Johnson & Johnson is a Dividend King. Those are companies with 50 (or more) straight payout increases -- Johnson & Johnson's streak is at 64. This once again highlights the strength of its underlying business, as paying dividends for that long, let alone raising them every year, is no easy feat. The regular payouts can also help mitigate market losses during a downturn.

Johnson & Johnson can overcome its challenges

Even though Johnson & Johnson has a solid business, there are at least two risks investors should keep in mind. One of them has been hanging over the company's head for a long time. Johnson & Johnson is still dealing with thousands of lawsuits from plaintiffs who claim that its talc-based products gave them cancer. The pharmaceutical leader has tried several tactics to put most of these in the rearview mirror. So far, it has failed. Then, there is the potential impact of government price negotiations in the U.S. on Johnson & Johnson's financial results.

Regulators have already targeted several of the company's products for negotiation. If they pick even more in the future, it could become a serious headwind. Even with these problems, though, Johnson & Johnson's shares are attractive. The company's legal issues haven't changed its credit rating, which strongly suggests these lawsuits won't financially ruin it. Even if there is a massive payout in the future, Johnson & Johnson should be able to handle it. Regarding government price negotiations, Johnson & Johnson is performing well so far despite that. The company is expecting its sales to grow by about 7% year over year (at the midpoint) in 2026 to $100.8 billion, even though government-negotiated prices for three of its products kicked in this year.

Johnson & Johnson has been around for over 100 years. Throughout its storied history, it has dealt with massive changes to the healthcare sector in the U.S., including the introduction of Medicare and Medicaid, and many others. The past is no guarantee of the future, but the company's strengths -- such as its vast, diversified portfolio and pipeline and innovative capabilities -- have allowed it to overcome similar challenges in the past and can do so again. So, investors should stay put. Johnson & Johnson can navigate this landscape and deliver solid returns over the long run, especially for investors who reinvest the dividend.

Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.