Johnson & Johnson (JNJ), Exxon Mobil Corporation (XOM), The Coca-Cola Company (KO): Why You Should Buy Dividend Stocks Instead of Bonds

Even better, over the past few decades, Exxon Mobil Corporation (NYSE:XOM) has committed itself to raising its shareholder payout on an annual basis. To that end, Exxon Mobil increased its dividend by 21% in 2012 and then again by 11% early this year.

This year’s dividend bump represented the 31^st consecutive annual dividend increase from Exxon Mobil Corporation (NYSE:XOM). According to the company, its dividend has grown by 6% compounded annually over the past 30 years.

To illustrate the outstanding financial position that both Johnson & Johnson (NYSE:JNJ) and Exxon Mobil are in, consider that they are two of the four publicly traded companies that hold the coveted triple-A credit rating from Standard & Poor’s.

The Coca-Cola Company (NYSE:KO) is a legend in its own right, counting Warren Buffett, one of the most famous investors of all time, as a financial backer.

The Coca-Cola Company (NYSE:KO) is about as steady as it gets. The company grew 2012 sales and diluted EPS by 3% and 6%, respectively, versus the prior year.

And, even better, the company isn’t shy about sharing its success with shareholders. Earlier this year The Coca-Cola Company (NYSE:KO) raised its dividend for the 51^st year in a row.

The Foolish takeaway

The bottom-line is this: even though bond payments are more guaranteed than dividend payments, there’s a steep cost to this perceived safety. Bondholders will lose in times of inflation, as those coupons will lose purchasing power.

Dividends, on the other hand, rise along with profits over time, thereby insulating equity holders against the ravaging effects of inflation.

Bonds have their place in a conservative investor’s portfolio, but if the goal is long-term wealth creation, there’s simply no better place to park your cash than in highly profitable stocks such as Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and Exxon Mobil Corporation (NYSE:XOM). These companies have pumped out increasing profits for decades on end, and have paid shareholders regularly increasing dividends along the way.

If you have a desire for income but also want to protect yourself against rising prices, then dividend stocks are the place to be. J&J, The Coca-Cola Company (NYSE:KO), and Exxon Mobil are each excellent companies that deserve a place in every Foolish portfolio.

The article Why You Should Buy Dividend Stocks Instead of Bonds originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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