Skip to main content

Abbvie Inc(ABBV-N)

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

2 Top Dividend Stocks to Buy Hand Over Fist

Motley Fool - Sun Mar 17, 7:15AM CDT

Finding high-yielding companies isn't everything when investing in dividend stocks. Sometimes, companies' yields increase after their share prices drop significantly, which can occasionally be a sign that the business could be in trouble and may have to decrease its payouts. So before investing in a high-yield dividend stock, it's essential to ensure that its underlying business is solid and will likely continue to hike its dividends.

Let's look at two companies with yields higher than the S&P 500 average that are worth buying and holding on to now: AbbVie(NYSE: ABBV) and Gilead Sciences(NASDAQ: GILD).

1. AbbVie

Every good thing must come to an end. AbbVie experienced that firsthand last year with the loss of patent exclusivity for its superstar rheumatoid arthritis drug, Humira, in the U.S. Though this was a significant loss, considering how successful Humira has been, all drugmakers eventually run into patent cliffs. The important question is whether the company can bounce back after a short period of sales decline. The answer seems to be yes.

AbbVie has several blockbusters in its portfolio, including the rest of its immunology lineup -- Skyrizi and Rinvoq -- along with its Botox franchise, depression therapy Vraylar, and cancer drug Venclexta. AbbVie expects Skyrizi and Rinvoq to exceed Humira's peak sales and reach $27 billion in revenue between them by 2027. Management also said long ago that it would be extremely difficult for competitors to create biosimilars for Botox.

That's one of the reasons AbbVie acquired Allergan in 2020 for $63 billion. AbbVie's newer approvals should also play a major role, eventually. These include migraine treatment Qulipta, first approved in 2021, and cancer medicine Epkinly, launched in the U.S. last year. Qulipta's sales more than doubled in 2023 to $408 million. It should exceed $1 billion in annual sales in a couple of years.

AbbVie's pipeline will continue delivering newer and better products. That's the key to surviving patent cliffs. Looking at AbbVie's dividend track record, the company has much to offer income seekers. It has now increased its payouts for 52 consecutive years. AbbVie's forward dividend yield of 3.47% is higher than the S&P 500's average of 1.47%. Its cash payout ratio of 48% shows it can cover its dividends and has plenty of room for payout hikes.

So despite AbbVie's recent struggles, its dividend profile and overall prospects remain solid.

2. Gilead Sciences

Gilead Sciences is also dealing with slow revenue growth. In 2023, the company's top line decreased by 1% year over year to $27.1 billion. However, the biotech's coronavirus portfolio has affected its financial results. Excluding Gilead Sciences' COVID-19 antiviral medicine, Veklury, the company's total sales last year increased by a much better 7% year over year. Gilead Sciences' performance should improve as the effects of Veklury fade.

The drugmaker can still count on its market-leading HIV portfolio led by Biktarvy, the No. 1 prescribed regimen in the U.S. As of the fourth quarter, Gilead Sciences had a 70% share of the HIV treatment market in the U.S. and a 40% share of the PrEP space. Last year, Biktarvy's total sales grew by 14% year over year to $11.8 billion. In February, the medicine earned another label expansion for HIV patients with a common form of treatment resistance, a regulatory achievement that could help it grow its sales even faster.

There are newer medicines in Gilead Sciences' portfolio that should eventually make a meaningful impact. Sunlenca (lenacapavir), a long-lasting HIV regimen, was first approved in late 2022 and is being tested in several more clinical trials that should lead to various label expansions. Meanwhile, Gilead has been ramping up its oncology portfolio, which performed well last year. Its oncology sales jumped by 37.1% year over year to $2.9 billion in 2023.

Though it still makes up a small percentage of its revenue, Gilead Sciences has significantly expanded its oncology pipeline in recent years. That should lead to critical approvals down the road. Gilead Sciences has a solid track record of innovation, so the company's slump over the past few years shouldn't scare off investors. The biotech also has a solid dividend profile. It has increased its payouts by 22% in the past five years.

Its dividend yield currently sits at 4.10%, and its cash payout ratio is reasonable at 51%. Investors can trust Gilead Sciences' dividend program.

Should you invest $1,000 in AbbVie right now?

Before you buy stock in AbbVie, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AbbVie wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of March 11, 2024

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Gilead Sciences. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.

More from The Globe

inside the market
Short sales on the TSX: What bearish investors are betting against
Larry MacDonald