2 Very Healthy High-Yield Dividend Stocks to Buy for a Safe and Growing Passive Income Stream

A higher dividend yield is nice because it allows you to collect more dividend income on every dollar you invest in a stock. However, the company paying that dividend needs to be healthy to ensure it can maintain its payout during the tough times that inevitably come.

Medtronic (NYSE: MDT) and Johnson & Johnson (NYSE: JNJ) are two very healthy, high-yielding dividend stocks. This makes them great options for those seeking a bankable income stream that should steadily rise in the future.

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A healthy dividend grower

Medtronic currently has a 3.1% dividend yield. That's more than double the rate of the S&P 500 (SNPINDEX: ^GSPC), which has a 1.2% dividend yield. Put another way, every $100 invested into Medtronic stock would produce about $3.10 of dividend income each year, compared to only $1.20 per $100 invested in an S&P 500 index fund.

The medical technology giant has a very healthy financial profile. It has produced $4.5 billion of net cash from operating activities through the first nine months of this year. It invested $1.4 billion into property, plants, and equipment, leaving it with $3.1 billion in free cash flow. That easily covered the $2.6 billion in dividends paid to shareholders.

Medtronic used the remaining cash and its strong balance sheet flexibility (it has a very healthy A/A3 bond ratings) to repurchase nearly $3 billion of its stock. The company had added $5 billion to its share repurchase authorization earlier last year. It also has the financial fortitude to make acquisitions as opportunities arise.

Medtronic produces strong free cash flow even after investing heavily in research and development to test and launch new products. Those new products help grow its cash flow, which allows the company to steadily increase its dividend. The medtech giant has increased its dividend for 47 straight years, growing it at a 16% compound annual rate.

More dividend growth seems likely. Medtronic expected to deliver about 5% organic revenue growth this fiscal year and a little faster growth in its earnings per share. Meanwhile, with 120 product approvals over the past year and more in the pipeline, the company still has plenty of growth ahead.

As financially fit as they come

Johnson and Johnson also pays a 3.1%-yielding dividend. The healthcare giant backs that high-yielding payout with one of the healthiest financial profiles in the world.

The company has an AAA bond rating, tied with Microsoft as the highest in the world (and better than the U.S. government). The nearly $400 billion healthcare behemoth by market cap ended the fourth quarter with only $12 billion of net debt ($25 billion of cash against $37 billion of total debt). Meanwhile, it produces about $20 billion in free cash flow each year, easily covering its $11.8 billion dividend outlay.

Johnson & Johnson has been using its financial strength to go on a shopping spree. It has deployed, announced, or committed $32 billion into strategic inorganic growth opportunities over the past year, including agreeing to buy Inter-Cellular Therapies for $14.6 billion last month to strengthen its neuroscience platform. Those investments added to its product portfolio and pipeline to drive future revenue and earnings growth. The company also invested $17.2 billion in research and development last year to discover and test new innovative medicines and medical technologies.

The company's growth investments should help increase its sales and earnings, enabling it to continue raising its dividend. Johnson & Johnson has hiked its payment for 62 straight years. That has it in the elite group of Dividend Kings, companies with 50 or more years of growing their dividends.

Very healthy dividends

Medtronic and Johnson & Johnson generate lots of cash and have strong balance sheets. Because of that, they have ample financial flexibility to pay their high-yielding dividends and invest in growing their business. That growth should enable them to continue their long-standing dividend growth streaks, making them very healthy dividend stocks to buy and hold for the long term.

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Matt DiLallo has positions in Johnson & Johnson and Medtronic. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2026 $395 calls on Microsoft, long January 2026 $75 calls on Medtronic, short January 2026 $405 calls on Microsoft, and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.