Should a high dividend yield raise a yellow flag for investors? In some cases yes. But not always. There are select stocks with relatively safe dividends that also offer exceptionally high returns for temporary reasons or simply due to the nature of the business they operate. The trick is to be able to distinguish which pitfalls are pitfalls and which offer opportunities.
To help you in your search, three Fool.com contributors have put together reports on some options they think are worth considering. This is why they think AbVie (NYSE: ABBV), Gilead Sciences (NASDAQ: GILD)And Pfizer (NYSE:PFE) are spectacular high-yield dividend stocks to buy in November.
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David Jagielski (AbbVie): Drugmaker AbbVie is a solid all-round dividend stock, suitable for any type of investor. The dividend yield of 3.2% is above average and the company has increased this for years.
Last week, AbbVie announced its latest earnings results, and in addition to strong results, it also announced that it would increase its dividend again. The new quarterly dividend of $1.64 per share represents a 5.8% increase in the payout. Since it split from Abbott Laboratories in 2013, AbbVie increased its quarterly dividend by a whopping 310%.
There’s a lot of value here for investors beyond just the dividend, and that makes AbbVie a spectacular investment to hold. Not only will the dividend likely continue to grow in the coming years, but so will the revenue and profit figures.
Over the past nine months, the company has generated $41.2 billion in revenue, up 3% from the same period last year. While that may seem unimpressive, that’s because the company has faced significant headwinds as Humira, one of its best-selling drugs for years, has lost patent protection and sales are down 34% this year. AbbVie’s robust diversification has allowed the company to weather the storm and still achieve positive growth.
AbbVie has been strengthening its portfolio through acquisitions in recent years, and with the stock trading at a modest price-to-earnings ratio of 17, it’s an attractive option for both growth and dividend investors.
Prosper Junior Bakiny (Gilead Sciences): A high return means little if the company it backs is likely to eventually cut its payouts. With Gilead Sciences, investors shouldn’t have that problem.
While the past five years haven’t been easy for the drugmaker, with unforeseen regulatory setbacks and pandemic-related disruptions to its business, the company has continued to increase its dividends. Gilead Sciences’ payouts are up 22.2% since the end of 2019. The company’s forward yield is over 3.4%, compared to the S&P500‘S (SNPINDEX: ^GSPC) average 1.3%.
A company’s ability to increase its dividends despite significant problems is a testament to the underlying strength of its business. In the meantime, the company managed to maintain turnover, partly thanks to Veklury, a drug for COVID-19 therapy that it developed.
Elsewhere, Gilead Sciences remains a leader in the HIV drug market thanks to therapies such as Biktarvy, the most prescribed HIV regimen in the US, with a market share of more than 49%.
The company’s oncology segment also continues to make progress. Gilead Sciences’ long-term plan was to make significant progress in oncology. More than half of the company’s 52 clinical programs are new cancer drugs in development or existing drugs seeking label expansion.
Of course, Gilead Sciences has many exciting programs in other areas, including in HIV. The company must continue to do what it has been doing for a while: develop innovative medicines, deliver strong financial results and reward investors with dividend increases. That’s why Gilead Sciences is a solid, high-yield income stock to buy this month.
Keith Speights (Pfizer): Investors looking for a particularly juicy dividend should definitely take a look at Pfizer. The major drugmaker’s dividend yield currently stands at 6.1%. Pfizer’s main priority for capital allocation is to maintain and grow its dividend. I think the company will be able to achieve that goal.
As great as Pfizer’s dividend is, it’s not the only reason to consider investing in the pharmaceutical giant. The stock trades at a price of about 9.2 times forward earnings, about half the S&P 500 healthcare sector’s expected earnings of 18.3. Pfizer’s price-earnings-growth ratio (PEG) is a low 0.72. LSEG.
Growth may seem like a huge challenge for Pfizer, given the looming loss of patent exclusivity for several top drugs in the coming years. However, the prospects are better than they seem at first glance.
Pfizer’s range includes several rising stars, such as the migraine therapy Nurtec ODT, the eczema drug Cibinqo and the alopecia areata pill Litfulo. Perhaps surprisingly, COVID-19 antiviral therapy Paxlovid has become another big winner for the company. There is also significant upside potential for Abrysvo, the respiratory syncytial virus (RSV) vaccine.
Don’t forget Pfizer’s pipeline. The company has 108 programs in clinical development, 30 of which are in advanced testing.
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*Stock Advisor returns November 4, 2024
David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie and Pfizer. Prosper Junior Bakiny has no position in any of the shares mentioned. The Motley Fool holds positions in and recommends AbbVie, Abbott Laboratories, Gilead Sciences and Pfizer. The Motley Fool has a disclosure policy.
3 Spectacular High-Yield Dividend Stocks to Buy in November, originally published by The Motley Fool
