Certifications such as the Good cleaning Seal helps consumers know which products are safe and perform well. Unfortunately, no Good cleaning There is a seal for dividend stocks.
However, the best part is that a company belongs to the elite group known as Dividend Kings. To qualify, a company must increase its dividend for at least 50 consecutive years. Most income investors will sleep better at night knowing that a stock has such an impressive dividend track record.
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But some Dividend Kings are better than others. What is the best choice at the moment? Here is my favorite Dividend King to buy in November.
Technically, AbVie(NYSE: ABBV) has only been around since 2013. However, that doesn’t mean the big pharmaceutical company can’t be a Dividend King. AbbVie’s company operated as part of for decades Abbott Laboratories before being spun off as a separate listed entity 11 years ago.
AbbVie therefore inherits the rich dividend history of its parent company. In September, Abbott announced its 52nd consecutive annual dividend increase. Last week, AbbVie followed suit with its latest dividend increase.
Many Dividend Kings have longer streaks of dividend increases than AbbVie. However, few can match the level of the pharmaceutical manufacturer’s dividend increases in recent years. Since the spin-off from Abbott, AbbVie has increased its dividend payout by a whopping 310%.
Some Dividend Kings don’t offer a princely dividend yield. However, AbbVie’s future dividend yield is 3.26% – almost 2.7 times higher than the yield of the S&P500(SNPINDEX: ^GSPC). The returns on the big pharma stocks would be even higher if AbbVie’s share price wasn’t up 30% this year.
I think AbbVie’s momentum will continue. Some investors are concerned about the negative impact of declining sales of Humira, the company’s best-selling drug, after losing patent exclusivity last year. Not me. I have had confidence in AbbVie’s strategy to meet these challenges, and my confidence appears to be paying off.
In the third quarter of 2024, Humira’s revenue on an operating basis fell 36.5% year-over-year due to biosimilar competition. Still, AbbVie’s overall revenue rose, with the company posting revenue $260 million above expectations. How did the drug manufacturer achieve this feat? By investing in research and development and making smart acquisitions.
AbbVie CEO Rob Michael said in the Q3 call that the company expects Humira’s successors, Skyrizi and Rinvoq, to achieve combined sales of more than $17 billion this year. He added: “[W]We see substantial opportunities for continued strong growth well into the next decade.”
Other important growth drivers for AbbVie came from its business development deals. For example, the company’s acquisition of Allergan in 2020 added products such as migraine therapies Qulipta and Ubrelvy, as well as the antipsychotic Vraylar, to AbbVie’s portfolio. All three drugs generated double-digit sales growth in the third quarter.
AbbVie continues to invest heavily in R&D. The pipeline contains more than 90 programs. The company’s investments recently paid off with US regulatory approval for the Parkinson’s disease drug Vyalev.
Michael noted in the Q3 call that AbbVie has completed 15 deals so far this year, including most recently the acquisition of Cerevel Therapeutics. CFO Scott Reents said the company’s “strong free cash flow also provides capacity for additional business development.”
While many stocks are priced for perfection these days, AbbVie’s valuation remains attractive despite the big gains. Shares trade at 16.9 times forward earnings. Better yet, the stock’s price-to-earnings-growth ratio (PEG), based on five-year growth projections, is a super low 0.47, according to LSEG.
AbbVie offers a high dividend yield, an impressive track record of dividend increases, strong growth prospects and an attractive valuation. It should come as no surprise that this stock is my favorite Dividend King to buy right now.
Consider the following before buying shares in AbbVie:
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Keith Speights has positions in AbbVie. The Motley Fool holds positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool has a disclosure policy.
My Favorite Dividend King to Buy in November was originally published by The Motley Fool
