So far, 2022 has been a challenging year for the stock market due to rampant inflation, the Federal Reserve’s monetary policy tightening, and geopolitical concerns. The Fed recently announced its third consecutive 75-basis-point hike and hinted at maintaining its hawkish stance until inflation comes under control. Wells Fargo analysts expect steeper rate hikes in the coming months and have forecasted the key rate to a range between 4.75% and 5.00% in the first quarter of 2023.

Therefore, the odds of the economy tipping into a recession are increasing. According to the Conference Board, the likelihood of a recession in the United States within the next 12 months has shot up to 96%. In addition, many economists expect the fourth quarter of 2022 and the first quarter of 2023 to witness weak real GDP growth.

Following an ugly third-quarter performance, investors are bracing for more wild market swings in the coming months. Therefore, investing in resilient stocks that offer reliable dividend income could be wise. To that end, Johnson & Johnson (JNJ) and Merck & Co., Inc. (MRK) could be ideal additions to your portfolio in the fourth quarter. These two stocks have a history of enduring challenging market conditions and delivering stable returns.

Johnson & Johnson (JNJ)

JNJ develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through three segments: Consumer Health; Pharmaceutical; and MedTech. It offers baby care, skin health, allergy, electrophysiology, orthopedics, and advanced and general surgery products and solutions.

On September 20, JNJ opened its San Francisco Bay Campus, a cutting-edge Research and Development (R&D) center in the Bay Area, one of the most well-known global hubs for innovation and entrepreneurship. The facility connects essential scientific and technology resources by combining Janssen R&D, Johnson & Johnson Innovation, and Johnson & Johnson Technology.

Also, in the same month, JNJ’s Board of Directors authorized a $5 billion repurchase of its common stock. “The last few years have demonstrated the resilience of Johnson & Johnson. With continued confidence in our business and pipeline, the Board of Directors and the management believe that Company shares are an attractive investment opportunity, said Joaquin Duato, JNJ’s CEO.

JNJ’s forward annual dividend of $4.52 per share yields 2.77% on the current price. The company’s dividend payments have grown at a 6% CAGR over the past five years. It has increased dividends for 59 consecutive years.

JNJ’s reported sales increased 3% year-over-year to $24.02 billion for the fiscal 2022 second quarter ended June 30, 2022. The company’s adjusted net earnings rose 4.3% year-over-year to $6.91 billion, while its adjusted earnings per share grew 4.4% from the previous year’s quarter to $2.59.

Analysts expect JNJ's revenue and EPS for the current year (ending December 2022) to grow 1.9% and 2.8% year-over-year to $95.53 billion and $10.08, respectively. Also, the company's revenue and EPS for the next year are expected to come in at $98.98 billion and $10.61, indicating a growth of 5.3% and 3.6% year-over-year, respectively.

The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. JNJ shares have gained marginally over the past year.

JNJ’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

JNJ has a grade of A for Stability and B for Growth and Quality. The stock topped the list of the 163-stock Medical-Pharmaceuticals industry. Click here to see additional POWR Ratings (Value, Sentiment, and Momentum) for JNJ.

Merck & Co., Inc. (MRK)

MRK is a leading healthcare company that offers prescription medicines, vaccines, biological therapies, and animal health products. The company operates through Pharmaceuticals and Animal Health segments.

Last month, MRK’s division, Merck Animal Health, completed a minority investment in LeeO Precision Farming B.V. This Netherlands-located company provides a cloud-based, real-time digital swine traceability solution for farmers, producers, and retailers. This investment complements Merck Animal Health’s broad portfolio of veterinary pharmaceuticals, vaccines, and technology solutions.

In the same month, MRK announced that KEYTRUDA, an anti-PD-1 therapy, received four new approvals from Japan’s Ministry of Health, Labor and Welfare (MHLW). KEYTRUDA has now been approved for 23 uses in 13 different types of cancer. The MHLW approval is expected to boost the company’s sales in Japan.

MRK’s $2.76 per share forward annual dividend yields 3.2% on the current price. The company’s dividends have grown at a 9% CAGR over the past five years. The company has a history of increasing dividends for 11 consecutive years.

In the fiscal 2022 second quarter ended June 30, 2022, MRK’s sales increased 28% year-over-year to $14.59 billion. The company’s non-GAAP net income grew 204.2% from the year-ago quarter to $4.74 billion. Its non-GAAP earnings per share came in at $1.87, up 206.6% year-over-year.

Analysts expect MRK’s revenue for the fiscal year 2022 (ending December 2022) to come in at $58.62 billion, indicating an increase of 20.4% from the previous year. The company’s EPS for the ongoing year is expected to grow 22.6% year-over-year to $7.38. Furthermore, MRK has topped the consensus revenue and EPS estimates in each of the trailing four quarters.

The stock has gained 12% year-to-date and 14.7% over the past year.

MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.

MRK has a B grade for Growth, Value, Sentiment, and Quality. It is ranked #2 among 163 stocks in the same industry. Click here to see MRK’s POWR Ratings for Stability and Momentum.

JNJ shares rose $0.44 (+0.27%) in premarket trading Monday. Year-to-date, JNJ has declined -2.63%, versus a -23.93% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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