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3 Spectacular Dividend Stocks to Buy in July

Motley Fool - Tue Jul 4, 7:14AM CDT

A new month is here. And with it comes a new opportunity to invest in spectacular dividend stocks.

Three Motley Fool contributors think they know some great candidates to buy in July. Here's why they picked AbbVie(NYSE: ABBV), Bristol Myers Squibb(NYSE: BMY), and Johnson & Johnson(NYSE: JNJ).

High-yield dividend royalty

Keith Speights (AbbVie): If you're in the market for a high dividend yield, AbbVie could be right up your alley. The big pharmaceutical company's dividend yield currently stands at nearly 4.5%.

Some high-yield dividends aren't all that reliable. That isn't the case with AbbVie, though. The drugmaker has increased its dividend for 51 consecutive years. This impressive track record qualifies AbbVie to be part of the elite group of stocks known as Dividend Kings.

There is one area of concern with AbbVie. The company's top-selling drug, Humira, lost U.S. patent exclusivity earlier this year. Sales for Humira are sinking, pulling down AbbVie's total revenue and profits in the process.

The good news is that AbbVie has plenty of other products with growing sales in addition to a promising late-stage pipeline. While sales will likely continue to slump for a while, the company expects to return to solid growth by 2025.

An underrated dividend stock trading at a steep discount

David Jagielski(Bristol Myers Squibb): Shares of Bristol Myers Squibb are down around 10% this year. For long-term investors, though, this is a great stock to buy and hold. The company is a big name in healthcare, with a market cap of $137 billion. Over the past 12 months, it has generated strong operating margins of 20%.

One thing that makes Bristol Myers such a special stock to own is that it has a solid track record for growing via mergers and acquisitions. These deals are indicative of good capital allocation decision-making. Largely as a result of its business development, the drugmaker's revenue has more than doubled over the past five years.

Bristol Myers Squibb is losing patent protection on some of its key drugs this decade, including Eliquis, Revlimid, and Opdivo. However, it also has some new drugs that will help recoup some of those losses, including skin cancer drug Opdualag and heart medication Camzyos. Plus, the company has a strong pipeline featuring over 50 compounds in development.

The big drugmaker has generated close to $12 billion in free cash flow over the past four quarters, which is more than double what it has paid out in dividends during that time frame ($4.6 billion). With sufficient money to cover its growing dividend plus resources to help its business grow, this can be a spectacular investment to buy for the long haul.

Bristol Myers has increased its payouts by 63% over the past 10 years. Today, it yields 3.5%, which is more than double the S&P 500 average of 1.6%. Trading at just 8 times its estimated future profits, it's an underrated dividend stock to buy today.

Death, taxes, and this company's dividend

Prosper Junior Bakiny (Johnson & Johnson): What do dividend investors look for in a company? First and foremost, they look for those robust businesses that can survive any downturn. But other things matter, too, including the corporation's dividend history and long-term prospects. Pharma giant Johnson & Johnson is exemplary in each of these categories.

Thanks to its vast and diversified portfolio of medicines and medical devices, the company generally records steady and consistent revenue and earnings. Regular profits and cash flow help support dividend growth, and Johnson & Johnson is also highly impressive in this department. The company is on its 61st consecutive year of dividend increases, making it a Dividend King.

There are very few companies that boast a better track record in this regard. Johnson & Johnson should be able to keep this streak going for a while as long as it remains a leader in the healthcare industry, which won't stop being relevant anytime soon. The company has proven its ability to remain competitive through innovation.

Consider the drugmaker's current pipeline, which features over 100 ongoing programs. Some of these are brand-new medicines that will help supplement Johnson & Johnson's existing lineup, many of whose existing products also routinely earn label expansions. Johnson & Johnson is looking at several growth avenues within medical devices, including in the exciting robotic-assisted surgery field with its Ottava device. At any rate, the need for the kinds of products it offers will only increase along with the world's aging population.

Johnson & Johnson should continue spending enough research and development resources to keep the innovative wheel turning and stay competitive in this challenging industry. Of course, that also means the company's dividend is about as safe as they come, considering its excellent track record, strong fundamentals, and growth prospects. Those seeking excellent dividend-paying companies in July and beyond should look no further than Johnson & Johnson.

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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie and Bristol Myers Squibb. Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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