Growth stocks have been all the rage on Wall Street lately. Technical highlights such as Microsoft, NvidiaAnd CrowdStrike regularly reach new record highs. Microsoft and Nvidia pay symbolic dividends, but the yields are well below 1%. I love these types of growth stocks, but adding high-quality dividend stocks to a portfolio is also a great idea.
Here are a few benefits of dividend stocks:
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Regular income. Getting a nice quarterly deposit is a great source of money to pay bills, enjoy some extras in life or reinvest.
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Less stress. Dividend stock investors don’t have to worry as much about short-term price fluctuations. As long as the company is strong, revenues will still come in and the stock should do well in the long term.
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Ideal for retirees. Dividend stocks are great if you want extra income in retirement. Unlike growth stocks, you don’t have to sell shares to receive cash.
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Companies that pay dividends are usually financially sound.
Here are a few investment suggestions, whether it’s $10,000 or much more or less.
AbVie
Most people might know AbVie (NYSE: ABBV) as the maker of the blockbuster drug Humira. Humira is one of the highest-grossing prescription drugs ever, with peak sales of more than $21 billion in 2022. After 2022, biosimilars entered the market in Europe and last year in the US. Sales of Humira have dropped significantly and will continue to drop due to cheaper options. However, AbbVie has been preparing for this possibility for years by acquiring and developing new products.
AbbVie’s next blockbuster combination is Skyrizi and Rinvoq, which is expected to reach $16 billion in sales this year and easily surpass Humira’s peak sales in 2027, as shown below.
AbbVie also has a robust aesthetics portfolio including Botox and Juvederm and neuroscience offerings including Botox Therapeutic and Vraylar. Perhaps the most exciting long-term development is the recent acquisition of ImmunoGen. ImmunoGen’s attraction is its oncology product Elahere. This drug is currently approved for one type of treatment for ovarian cancer, and AbbVie has several clinical trials underway to expand its use. These are all reasons why AbbVie management expects revenue to grow nearly 10% annually through 2029.
As shown below, AbbVie has increased its dividend annually since becoming a publicly traded company in 2013, and its current yield of 3.6% is near average.
ABBV Dividend Yield data according to YCharts
AbbVie has historically been a great dividend stock, and all indications are that it will remain that way for the foreseeable future.
Starbucks
Starbucks (NASDAQ:SBUX) faces enormous challenges, including geopolitical issues in China, the rise of independent coffee shops and slowing consumer spending. But as Warren Buffett says, it’s often best to buy companies when others are going the other way. And others are fleeing for good as the price retreats to near five-year lows despite the pandemic.
The latest earnings release, for the second quarter of fiscal 2024 ending March 31, highlights the above challenges. Comparable sales fell 4%, led by an 11% decline in Chinese sales, which caused a sharp sell-off in the share price. Total revenue for the quarter was $8.6 billion, down 2% year over year.
Despite the challenges, Starbucks is still a very profitable company. In the second quarter, the company generated operating income of $2.6 billion and diluted earnings per share (EPS) of $1.58. Operating cash flow is also strong, with $2.9 billion created in the second quarter, compared to $2.4 billion in the previous fiscal year. Starbucks is an iconic global brand, has 33 million rewards members and plans to grow that number. For example, it collaborated with bank of America to provide benefits to mutual cardholders. The current hurdles and the sharp decline in share prices could present a fantastic opportunity in the longer term.
How cheap is Starbucks stock historically? The dividend yield is near a ten-year high (even factoring in the pandemic) and well above average, as shown below.
Everything indicates that 2024 will be a difficult year for Starbucks. However, consider buying the sleeping giant, enjoying the dividend and holding until it wakes up.
Should You Invest $1,000 in Starbucks Now?
Before you buy shares in Starbucks, consider the following:
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Bradley Guichard has positions in AbbVie, CrowdStrike, Nvidia and Starbucks. The Motley Fool holds positions in and recommends Bank of America, CrowdStrike, Microsoft, Nvidia, and Starbucks. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
2 Super Smart Dividend Stocks to Buy Now with $10,000 was originally published by The Motley Fool
