Which income investors want to buy stocks with dividends that are likely to decline and questionable companies? None. Instead, income investors want stocks with virtually unstoppable dividends.
Three Motley Fool contributors think they’ve found health care stocks that fit the bill. Here’s why they picked Abbott Laboratories (NYSE: ABT), Amgen (NASDAQ: AMGN)And AbbVie (NYSE: ABBV).
A Dividend King with a diversified company to buy and hold for years
David Jagielski (Abbott Laboratories): Want a top dividend stock that you can safely buy and hold for years to come? Check out Abbott Laboratories. Not only does the company have a solid track record of paying and growing dividends, but its broad and diverse operations make it highly likely that the payout increases will continue for the foreseeable future.
You could dismiss Abbott as a mediocre income stock because of its modest 2% dividend yield. There are many other stocks with high yields. But the real reward of owning it is in the long run. It is a Dividend King that has increased its dividends for 52 consecutive years. It has also been paying dividends for a century.
Not only does the company have a solid track record, the future remains promising, as Abbott has many different ways to grow its business. It has pharmaceutical, nutritional, medical device, and diagnostics business units that offer it different growth opportunities. In its most recent quarter (ended June), the company reported positive organic growth, excluding the impact of COVID-19 testing, of more than 9% across its entire business. Each of its segments generated positive organic growth compared to the prior year.
The stock’s modest 67% payout ratio suggests there’s still plenty of room for the company to increase its dividend, especially considering the strength and diversity of Abbott Laboratories’ businesses. This is one of the better dividend stocks that buy-and-hold investors can own today.
A solid company, a solid dividend
Prosper Junior Bakiny (Amgen): What is the most important thing dividend investors should consider? A high yield is attractive, as is a competitive dividend per share. There are a number of other dividend-focused metrics that could be mentioned, but the underlying business of a company remains the most important factor to consider. A company’s dividend is only as good as the business that supports it.
That’s what makes Amgen such an attractive option. Amgen is a leading biotech company with a solid track record of innovation and a long list of approved products, many of which generate more than $1 billion in sales each year.
The pipeline looks just as exciting, especially since it could have one of the most promising candidates in the burgeoning weight-loss market; Amgen’s MariTide produced strong results in phase 2 trials. It still has a long way to go before it’s approved, if it ever gets that far. But it already has some analysts excited. According to market researcher Evaluate Pharma, MariTide could generate as much as $2.1 billion in sales by 2030.
While Amgen’s organic revenue growth hasn’t been impressive over the past three years, candidates like MariTide and others should help move things in the right direction. Amgen’s dividend program has remained strong throughout. The company’s payouts have increased by 55% over the past five years. The forward yield stands at 2.74%, higher than the S&P 500‘s average of 1.32%. Thanks to the company’s strong fundamentals, investors can be confident that Amgen will continue to increase its dividends.
Another great member of the dividend A team
Keith Speights (AbbVie): I didn’t realize that all three of our picks would start with the letter “A.” I find it fitting, though, because AbbVie truly deserves to be on the dividend A team.
The big pharma spun off from Abbott in 2013. AbbVie inherited Abbott’s stellar track record of dividend increases and, like its parent company, is considered a Dividend King. However, income investors should like AbbVie’s forward dividend yield of nearly 3.2% even more than they like Abbott’s yield.
AbbVie is fairly valued with an expected earnings multiplier of 18.2. The stock’s valuation looks even more attractive when the company’s growth prospects are taken into account.
Sure, AbbVie’s revenue and profits have been falling since its top-selling drug, Humira, lost U.S. patent exclusivity in early 2023. But a strong recovery should be on the way. Sales of AbbVie’s newer blockbuster autoimmune drugs, Rinvoq and Skyrizi, are soaring. The drugmaker also has strong growth engines in antipsychotic Vraylar and its migraine therapies Qulipta and Ubrelvy.
AbbVie’s pipeline offers more reason for optimism. The company has more than 90 programs in development. These include promising cancer, immunology and neurology drugs, several of which are in late-stage testing.
Should You Invest $1,000 in AbbVie Now?
Before you buy AbbVie stock, you should consider the following:
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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 has positions in and recommends Abbott Laboratories. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
3 Unstoppable Dividend Stocks to Buy Now was originally published by The Motley Fool
