It’s been a great few years for the stock market. The benchmark from the end of 2022 until November 29 S&P500(SNPINDEX: ^GSPC) index rose as much as 57.1% higher.
During this bull run, stock prices have risen far beyond the profits from their underlying businesses. As a result, the average dividend payer in the benchmark index offers a paltry 1.2% yield at recent prices.
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It’s a lot harder these days for income-seeking investors to find high-yield dividend stocks to buy, but it’s not impossible. Shares of Brookfield Infrastructure(NYSE: BIP)(NYSE: BIPC), AbVie(NYSE: ABBV)And Royalty Pharma(NASDAQ: RPRX) offering yields of over 3% at recent prices. In addition to the high yields right now, there’s a good chance that these dividend payers can increase their payouts much further before you’re ready to retire.
The economy as a whole tends to grow over time, but predicting which industries will grow the fastest is risky. That said, virtually all industries need infrastructure. With this in mind, we can reasonably assume that the amount of energy, data, water and freight that Brookfield Infrastructure transports and stores will continue to rise, along with its dividend payout.
There are two ways to invest in this high-yield dividend payer. Brookfield Infrastructure Corp. shares. (BIPC) offer an attractive dividend yield of 3.6%. If you’re prepared for the complex tax implications that come with owning shares of a master limited partnership, Brookfield Infrastructure Partners (BIP) trades at a lower price and offers a much larger yield of 4.6%.
In February, Brookfield Infrastructure increased its quarterly dividend payout for the 15th year in a row. The company increased its payout by 6% this year, and investors can reasonably look forward to at least another decade of significant payout increases.
Brookfield Infrastructure reported operating funds, a measure of earnings, rising to $2.31 per share in the first nine months of 2024. That’s far more than is needed to support a payout currently set at $1.62 per share per year.
Did you know that Americans spent $405.9 billion on prescription drugs in 2022? That was 8.4% higher than the previous year, and that was not an anomaly. The steadily rising sales of prescription drugs is a reliable trend that income-seeking investors can follow all the way to the bank.
AbbVie is one of the more attractive dividend-paying stocks in the pharmaceutical industry, with a yield of 3.6% at recent prices. It is also one of the fastest dividend growers in its sector. Since the split of Abbott Laboratories in 2013 the payout more than quadrupled.
AbbVie’s shares are unusually under pressure due to the loss of US patent-protected market exclusivity for its former lead drug, Humira. Sales of the anti-inflammatory shot fell 34% year over year to $7.3 billion in the first nine months of 2024.
AbbVie is a smart stock to buy now because it has several more recently launched blockbusters that offset Humira’s losses and drive earnings growth. The company’s new main revenue stream, Skyrizi, is a psoriasis injection that launched in 2019. Sales of the new blockbuster rose 48% year over year to $7.9 billion in the first nine months of 2024.
Skyrizi is single-handedly offsetting Humira’s losses, and it’s not the only young blockbuster with rising sales in AbbVie’s lineup. Rinvoq, an oral arthritis drug that also launched in 2019, produced nine-month sales that grew 52% year over year to $4.1 billion.
With many years of exclusivity for Rinvoq and Skyrizi, another decade of rapid dividend growth seems likely.
Investing in big pharmaceutical companies is one way to respond to the surge in prescription drugs, but it’s not the only way. Royalty Pharma is a specialty financier that lends money to drug manufacturers in exchange for a royalty interest in their products. At recent prices, the stock offers a yield of 3.6%.
Royalty Pharma’s assets include Trikafta and the rest of Vertex Pharmaceutica‘cystic fibrosis franchise. Trikafta is just one of 15 blockbuster drugs in the portfolio that generate annual sales of more than $1 billion.
Royalty Pharma increased its dividend payout by 5% in January, supported by rising sales of the drugs in which it has a stake. Investors can look forward to many more years of dividend growth. The company expects to invest between $10 billion and $12 billion in the four years ending in 2026.
Royalty Pharma’s role in the pharmaceutical industry is significant, but there is still plenty of room to grow. The industry is expected to need more than $1 trillion in capital over the next decade. Adding a few shares of this high-yield dividend grower to your portfolio now could mean huge passive income by the time you’re ready to retire.
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*Stock Advisor returns December 2, 2024
Cory Renauer has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends AbbVie, Abbott Laboratories, and Vertex Pharmaceuticals. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Growth Stocks to Buy in December and Hold for 10 Years or More Originally published by The Motley Fool
