2 Classic Dividend Stocks to Buy Today

The stock market is at all-time highs, which makes it harder to find financially strong dividend stocks, that conservative income investors have historically favored, trading at reasonable prices. But if you look hard enough, you can find them. Procter & Gamble (NYSE: PG) and ExxonMobil Corporation (NYSE: XOM) each have some headwinds to deal with, but that's created an opportunity to buy these high-yielding, financially strong companies.

1. The times are changing, again

Procter & Gamble is one of the world's largest consumer products companies. It currently offers a 3.4% yield, which is toward the high end of its historical range and more than the roughly 2% yield you'd get from an S&P 500 Index fund. The dividend has been increased for an incredible 62 consecutive years -- a feat achieved by very few companies.

Procter & Gamble's balance sheet is rock solid, too. Debt makes up a very reasonable 30% or so of the capital structure. It has nearly $12 billion in cash, which is enough to pay off a little more than half of its long-term debt if it wanted to. Looking at the income statement, operating income covered interest expense roughly 20 times over in the most recent quarter.

The reason that Procter & Gamble shares are yielding so much today is that the owner of Bounty, Gillette, and Tide, among many other brands, is out of step with the market. First off, consumer tastes are shifting toward products perceived to be natural and healthy. Procter & Gamble is introducing revised versions of its products to address this. Second, the internet has allowed upstart brands to grab market share. The company is fighting back to protect share and pushing hard to expand its own internet presence. Third, and most recent, cost inflation has crimped margins. Procter & Gamble recently announced that it would selectively raise prices.

While all of these issues are worth watching, Procter & Gamble has dealt with similar problems in its over 100 year history the same way it is dealing with them now. And if history is any guide, Procter & Gamble will work through these headwinds in time. Long-term investors, meanwhile, have an opportunity to buy the consumer giant while it's offering a historically generous yield because short-term investors are extrapolating current trends too far into the future.

2. A few years to wait

Exxon is an iconic name in the oil industry and is among the world's largest integrated energy companies. The yield is roughly 4.1% today, which is the highest it's been in around 20 years. More notable, perhaps, is the fact that the dividend has been increased every year for 36 years in a highly cyclical industry. I don't know of any other oil driller than can match Exxon's dividend record.

Long-term debt is a scant 10% of the capital structure. And while some of the other oil majors carry more cash than Exxon's $3.4 billion or so, the company's debt-light balance sheet means it doesn't need the extra protection of keeping excessive levels of cash on hand. Operating income, meanwhile, covered interest expense by 45 times in the most recent quarter. Oil prices are volatile and can make operating income volatile, but Exxon appears to have plenty of leeway to handle a downturn and cover its interest costs.

Two main issues are hampering Exxon's business, and stock price, today. First, oil production has been falling for a couple of years. That's not a good trend, but Exxon has plans to fix the issue via investments in onshore U.S. drilling, offshore oil drilling, and natural gas. The second problem is that the oil giant is no longer leading its peers on return on capital employed -- it has fallen to the middle of the pack. Once again, Exxon is working to fix the problem. It is focusing on high-return investments and taking more control of its biggest projects so it can put its expertise with large, complex construction efforts to better use.

Exxon believes it will be able to more than double earnings if oil prices stay around where they currently are once it has worked through these issues. The problem is that this earnings outlook is for 2025, which is still a long way off. That said, long-term investors can collect a generous yield from Exxon while it works toward that date, but only because short-term investors are punishing the company for thinking further out than the next quarter.

Out of favor, but worth a look

Procter & Gamble and ExxonMobil both offer a mixture of high yield and robust financial strength. In this market, the high yields are only there because each of the companies is facing business headwinds that have short-term minded investors spooked. But if you can think long term, and take comfort in the fact that solid balance sheets will carry both companies through to better days, then you can collect hefty yields while you wait for their businesses to pick up again. That's a decent risk/reward trade-off if you ask me.

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Reuben Gregg Brewer owns shares of ExxonMobil and Procter & Gamble. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.