Stock market sell-offs like the one we're currently experiencing are challenging periods for investors. However, with every challenge comes an opportunity to improve. For me, sell-offs are an opportunity to buy high-quality dividend stocks at lower prices, which enables me to lock in higher dividend yields. That allows me to generate even more passive income, which I can reinvest in producing additional income until I reach the point where it can cover my living expenses and I can retire.
I'm currently capitalizing on the sell-off in the market by going on a shopping spree for high-quality dividend stocks. I recently bought more shares of Johnson & Johnson(NYSE: JNJ), Starbucks(NASDAQ: SBUX), and Mid-America Apartment Communities(NYSE: MAA). Here's why I think they're great dividend stocks to buy for durable passive income.
One of the world's healthiest dividends
Shares of Johnson & Johnson have fallen more than 14% during the market's recent slump. The decline has driven up the healthcare giant's dividend yield to 3.8% (well above the S&P 500's 1.5% yield). That's one of the safest high-yielding dividends you'll find.
Johnson & Johnson is one of only two companies with a AAA bond rating (higher than the U.S. government). The more than $350 billion healthcare behemoth (by market cap) ended last year with a mere $12 billion in net debt ($25 billion in cash and marketable securities against $37 billion in total debt). That's a pittance for a company that generated about $20 billion in free cash flow last year. That total was more than enough to cover its dividend outlay ($11.8 billion).
The company is using its strong financial profile to invest in organically growing its business through research and development ($17.2 billion spent last year) and strategic inorganic growth opportunities ($32 billion deployed, announced, or committed over the past year). These investments should grow the company's revenue and cash flow to support its rising dividend. Johnson & Johnson has increased its dividend for 62 straight years, keeping it in the elite group of Dividend Kings.
A caffeinated dividend
Starbucks stock has tumbled more than 30% during the market's recent rout. The coffee giant's plunging stock price has pushed its dividend yield up to 3.1%. That's well above its historical average over the past decade, which is closer to 2%.
On the one hand, Starbucks is facing some headwinds. Tariffs on coffee could impact the company by increasing its costs. Meanwhile, growth has slowed for the coffee giant, which led it to hire a new CEO who aims to revitalize the company. That turnaround will take some time, especially if tariffs act as an additional cost headwind.
However, the company still produces a lot of cash (over $6 billion in its last fiscal year), which it used to invest in growing its footprint ($2.7 billion in capital spending) and pay dividends ($2.6 billion) with room to spare. Meanwhile, Starbucks has a strong, cash-rich balance sheet (nearly $4 billion of cash, cash equivalents, and short-term investments at the end of its fiscal 2025 first quarter). The company's strong financial position should enable it to continue growing its dividend (which it has done for 14 straight years) even amid its current headwinds.
Its headwinds are fading fast
Mid-America Apartment Communities' stock price has fallen almost 14% from its recent peak. That slump has pushed the real estate investment trust's (REIT) dividend yield up to 4.1%.
The apartment landlord has a solid record of paying dividends. It has never suspended or reduced its payment since coming public in 1994. While it hasn't increased its dividend every year, last year was the 15th straight year of hiking its payout.
Mid-America Apartment is in an excellent position to continue growing its dividend. It has battled headwinds from new apartment supply in recent years, which has slowed rent growth to a crawl in many of its markets across the Sun Belt region. However, the delivery of new apartments to its markets has peaked and should decline, which will drive an improvement in market conditions, especially since buying a house remains so expensive. As a result, the REIT expects rent growth to accelerate later this year and throughout 2026. On top of that, while other apartment developers have pulled back, Mid-America has gone on the offensive and started several new development projects, which should further enhance its growth in the coming years.
High-quality income stocks
Johnson & Johnson, Starbucks, and Mid-America Apartment Communities have excellent records of paying dividends, which should continue. Because of that, the recent slump in their stock prices looked like a great opportunity to add to my positions in these high-quality, high-yielding dividend stocks. That should enable me to generate more passive income in the future, putting me another small step closer to retirement.
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Matt DiLallo has positions in Johnson & Johnson, Mid-America Apartment Communities, and Starbucks and has the following options: short July 2025 $70 puts on Starbucks. The Motley Fool has positions in and recommends Mid-America Apartment Communities and Starbucks. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
