2 income stocks I think investors should buy in February

Income stocks are huge right now. With the threat of a recession on the horizon, investors are looking for companies that have predictable earnings and can distribute steady dividend payments to shareholders.

I don’t think this is a bad plan. Businesses with a strong track record when it comes to dividend payments are often solid, well-managed, and long-lasting investments.

Furthermore, I think there are some attractive opportunities in dividend stocks for investors seeking passive income. These are the two I saw this month.

Johnson & Johnson

The first is Johnson & Johnson (NYSE: JNJ). The stock fell 4% on Friday, but I think this presents a rare opportunity for investors.

The drop in stock prices is due to the company’s move to avoid a cancer-related lawsuit that has been blocked by the courts. Obviously, ongoing lawsuits present risks with stocks.

Johnson and Johnson has $6 billion in reserves to cover legal fees. That’s why I don’t think that having to face litigation can be a material problem.

Plus, there’s a lot to like about this stock for income investors. The company has been increasing its dividend for 60 years, averaging 5% annual growth in the last five years.

Additionally, J&J has a AAA credit rating. That’s higher than England – a country that can print its own money.

In my mind, Johnson & Johnson is a great stock for investors looking for passive income. And this recent drop in stock prices makes our list of top dividend stocks to buy in February.

Kraft Heinz

I am also looking at buying shares in it Kraft Heinz (NASDAQ:KHC). The stock price has been almost flat in 2023 so far, so I want to increase my investment in the company.

There is a risk that inflation could reduce the returns available to investors. This is true because I do not expect much growth in the business going forward.

However, at the current price, I don’t think it’s too dangerous. Inflation has eased in the UK and the US, and stock prices now look worthless.

Kraft Heinz has a total market value of $49.5bn. On top of this, it has $20bn in debt, which is partially offset by $1bn in cash.

The business generates $3.5bn in free cash flow each year. This yields 5% at current prices.

As well as paying dividends (with a current yield of 4%) Kraft Heinz has significantly reduced its debt. Total debt has decreased by about 8% annually since 2018.

This means the company’s balance sheet is improving, which should give it more flexibility in the future.

The shares I bought

With Johnson & Johnson, I think the market is overreacting to the threat of uncertainty. In the case of Kraft Heinz, I think the business is improving but the market has not seen it.

Both stocks look like good investment opportunities to me. I think that both can be a good choice for investors looking for passive income in February.