2 Top Dividend Kings Every Income Investor Should Own

Dividend Kings are in a league of their own. These companies have increased their dividends annually for at least the past 50 years. It's a short list, with only 56 companies currently making the cut.

These extremely resilient income stocks make great foundational holdings for any portfolio as they can provide some ballast during more challenging periods. Two top Dividend Kings that every income-focused investor should consider holding in their portfolio are Johnson & Johnson (NYSE: JNJ) and PepsiCo (NASDAQ: PEP).

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They currently pay higher-yielding dividends backed by very rock-solid financial profiles that should continue to grow in the years ahead.

1. A healthy dividend stock

Johnson & Johnson increased its dividend payment by 4.8% earlier this year, extending its streak to 63 straight years. The healthcare giant's payout currently yields 2.7%, more than double the S&P 500's level of 1.2%.

The company supports its attractive payout with one of the world's healthiest financial profiles. Johnson & Johnson has a pristine AAA bond rating, tied for the highest in the world and surpassing that of the U.S. government. The company backs its elite credit rating with a cash-rich balance sheet and cash-gushing business.

Johnson & Johnson ended the third quarter with $19 billion of cash against $46 billion of debt. Its $27 billion of net debt is minuscule compared to its $461 billion market cap. It's a very manageable amount for a company that has generated over $14 billion in free cash flow through the first nine months of this year. That free cash flow easily covers the company's dividend outlay, which has totaled $9.3 billion year to date.

The company generates gobs of free cash flow despite being among the world's top investors in research and development ($10.4 billion year to date). Those investments allow it to discover, develop, and test innovative medicines and new medical technologies.

Johnson & Johnson also utilizes its financial flexibility to make strategic acquisitions that enhance its R&D efforts. It most recently bought Intra-Cellular for $14.6 billion and was reportedly in talks to buy Protagonist Therapeutics in a deal that could value its existing partner at over $4 billion. These heavy investments in healthcare innovation should drive healthy revenue and earnings growth in the coming years, supporting Johnson & Johnson's ability to continue increasing its high-yielding dividend.

2. Plenty of pop to continue pushing the payout higher

PepsiCo raised its dividend by 5% this year, extending its streak to 53 years in a row. It has grown its payout at a 7.5% compound annual rate over the past 15 years. The global beverage and snacking giant has an even higher dividend yield of 3.7%.

The iconic food company backs its payout with a fortress balance sheet and durable cash flows. It has a strong A+/A1 bond rating. PepsiCo ended its most recent quarter with over $8.6 billion in cash, against over $50 billion in total debt -- a comfortable level for the company, which has a market capitalization of more than $200 billion.

The company generates robust cash flows (over $12.5 billion in operating cash flow last year). Giving it the funds to invest in capital expenditures to grow its business (over $5 billion annually) and pay dividends $7.2 billion last year. The company's capital spending helps support its long-term targets of delivering 4% to 6% annual organic revenue growth and high single-digit annual earnings-per-share growth. That healthy earnings growth rate should allow it to continue increasing its dividend.

PepsiCo also has the financial flexibility to make acquisitions to enhance its portfolio and growth profile. It has made several deals over the past few years to accelerate the transformation of its portfolio toward healthier options (e.g., Poppi, Sabra, and Siete). These purchases further bolster its ability to grow its earnings and dividend.

Anchor income stocks

Johnson & Johnson and PepsiCo have given their investors a raise every year for more than five decades, demonstrating the durability of their dividend payments during good times and bad. They back their higher-yielding dividends with resilient and growing cash flows and fortress financial profiles. That gives them the flexibility to continue growing their businesses and dividends in the years to come. Their combination of yield, durability, and growth makes them foundational stocks that can anchor any income portfolio.

Matt DiLallo has positions in Johnson & Johnson and PepsiCo. The Motley Fool recommends Johnson & Johnson and Protagonist Therapeutics. The Motley Fool has a disclosure policy.