There are many dividend stocks on the market. Some will ultimately reduce or suspend their payouts due to company-specific, economic or broader market concerns. Those aren’t the kind of dividend stocks investors want to own. Instead, income seekers should try to find companies with excellent underlying businesses that are likely to maintain their dividend program for a long time.
Find out why three Motley Fool contributors chose Eli Lilly (NYSE: LLY), AbVie (NYSE: ABBV)And Novartis (NYSE: NVS) because these are excellent passive income stocks that investors can safely hold.
Growth and dividend investors do not have to look elsewhere
Prosper Junior Bakiny (Eli Lilly): Few pharmaceutical companies have made as much noise in recent years as Eli Lilly. The company is proving to be an innovation powerhouse with major approvals such as Mounjaro in diabetes, Zepbound in obesity and possibly donanemab, which could earn the lead role in treating Alzheimer’s disease.
Eli Lilly’s financial results may have been a bit inconsistent over the past two years, but that was due to the ups and downs in sales related to the coronavirus. With this market no longer having an impact on revenue growth, the company should continue to move in a straight line north for years to come. Eli Lilly is one of the most attractive companies – and growth-oriented companies – in the industry, making it an attractive option for dividend investors.
It’s true that the company’s forward yield of 0.67% isn’t impressive. But that’s because of how much the stock has risen recently. The dividend itself has not lagged behind. Eli Lilly has increased its payouts by just over 100% over the past five years. The company should not stop there. Thanks to the many new approvals it has generated, analysts predict that Eli Lilly’s earnings per share (EPS) will grow by an average of 56% over the next five years.
Just try to find a pharmaceutical giant whose expected earnings per share even approaches this total. There aren’t many, if any. Eli Lilly will make a lot of money, some of which it could and certainly will return to shareholders. So investors can sit back and enjoy the ride as Eli Lilly delivers incredible sales and revenue growth, market-beating returns and an attractive dividend program.
A Dividend King with solid growth prospects
Keith Speights (AbbVie): There aren’t many stocks with a better dividend program than AbbVie. The drugmaker is a Dividend King with 52 consecutive dividend increases (including the years it was part of). Abbot). Over the past 10 years, AbbVie has grown its dividend by 269%. The dividend yield is currently almost 3.8%.
While AbbVie has been and will almost certainly continue to be a passive income machine, there’s more to like about the stock than just the dividend. The company may have surprisingly good growth prospects, given that sales of its best-selling blockbuster Humira are falling rapidly due to generic competition.
AbbVie expects to achieve solid revenue growth again next year. The project predicts high compound annual sales growth through the remainder of the decade. Two successors to Humira – Rinvoq and Skyrizi – are crucial for this expected growth. AbbVie expects the combined sales of the therapies to exceed $27 billion by 2027. That’s well above what Humira generated at its peak.
The major biopharmaceutical company also has other growth drivers. Sales of the antipsychotic drug Vraylar are expected to approach $5 billion annually. AbbVie’s migraine therapies should exceed combined sales of up to $3 billion. Revenue from the drugmaker’s aesthetics portfolio should rise above $9 billion by 2029.
We can’t discount AbbVie’s deal-making efforts. The recent acquisition of ImmunoGen and the upcoming buyout of Cerevel Therapeutics will add some potentially big winners to AbbVie’s lineup.
Novartis is a reliable growth stock with high yields
David Jagielski (Novartis): One healthcare stock currently producing a top income investment is Novartis. The Swiss-based pharmaceutical company has strong financials, pays a high dividend and is always looking for more growth.
Buying the shares today will secure you a dividend yield of 3.9% – almost three times as much as S&P500 average 1.4%. The company has also regularly rewarded its shareholders with raises; Novartis has increased its dividend payments for 27 years in a row.
In each of the past four years, the company has generated free cash flow of at least $11 billion, which is well above the $7.3 billion it paid out in dividends in 2023, giving Novartis enough of a cushion to cover both dividend payments and to balance growth. initiatives.
Last year, the company spun off its Sandoz generic and biosimilar businesses to focus more on growth. And until 2027, Novartis expects to generate annual growth of 5% per year. In 2023, Novartis reported annual revenue of $46.7 billion, which was 7% higher than the $43.5 billion reported the year before. The company has many exciting drugs in its portfolio, including the breast cancer drug Kisqali, which could generate peak sales of $4 billion.
As Novartis continues to expand its operations and cash flow, there will be more room for the company to return more money to its shareholders. At just 13 times estimated forward earnings, Novartis is a low-priced stock that can generate a lot of recurring income for investors willing to hold on for the long term.
Should You Invest $1,000 in Eli Lilly Right Now?
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Abbott Laboratories and CorVel. The Motley Fool has a disclosure policy.
3 Great Stocks That Are Passive Income Machines was originally published by The Motley Fool
