If you are looking for reliable dividend stocks that can provide steady income and growth in any market condition, you might want to consider these two blue chip companies that have proven their resilience and strength over time. Read on to find out more.
1. Abbott Laboratories
Abbott Laboratories(NYSE: ABT) is a global leader in healthcare products and services, with a diversified portfolio of medical devices, diagnostics, nutrition, and branded generic drugs. The company has a long history of innovation and excellence and has increased its dividend for 51 consecutive years.
In the second quarter of 2023, Abbott reported strong organic sales growth across three of its four operating segments, namely medical devices, established pharmaceuticals, and nutrition. During the quarter, the company benefited from the recovery in medical procedures after the pandemic-induced slowdown, the ongoing rebound in its infant formula business after last year's voluntary recall, and the robust demand for its continuous glucose monitoring franchise known as FreeStyle Libre.
However, the diversified healthcare company is facing the challenge of a significant decline in demand for COVID-19-related diagnostics. As a result, Abbott Laboratories' 2023 total Q2 sales decreased by nearly 15% compared to the same period a year ago. But Wall Street expects this temporary headwind to subside by 2024. To wit, Abbott is projected to return to mid-single-digit top-line growth as soon as next year.
Abbott pays a quarterly dividend of $0.51 per share, which translates to an annualized yield of 1.94% at current levels. That amount is modestly higher than the yield of the average S&P 500 (1.54%) listed stock. Its dividend is also well covered by earnings. Underscoring this point, Abbott's trailing-12-month payout ratio presently stands at 66.8%, which is relatively low for its peer group.
The one knock against Abbott is that its stock trades at almost 24 times projected earnings, which qualifies as a premium valuation for a large-cap healthcare stock. The company's strong fundamentals, improving outlook, and top-shelf dividend program, however, are arguably worth the price of admission.
2. Bristol Myers Squibb
Bristol Myers Squibb(NYSE: BMY), or BMS for short, is a global biopharmaceutical company that develops and markets innovative therapies for various diseases, such as cancer, cardiovascular, immunology, and neuroscience. The company has a robust portfolio of high-value medicines, such as Opdivo, Eliquis, Revlimid, and Zeposia, as well as several promising candidates in advanced stages of development, such as cardiovascular drug milvexian, hematology drug iberdomide, and pulmonary fibrosis treatment LPA1.
The drugmaker pays an annualized dividend of 3.72% at current levels, which is a fairly generous payout for a large-cap pharma stock. Its dividend is also well supported by earnings, evinced by its trailing-12-month payout ratio of approximately 59.8%.
The caveat with this stock is that the company is heading into a period of marked portfolio churn, with top performers like Opdivo and Eliquis poised to lose patent protection later on in the decade. Fortunately, BMS also happens to sport one of the deepest and most robust clinical pipelines in the industry, which should help it overcome these patent expirations.
What's the bottom line? BMS is a classic buy-and-hold vehicle. The company isn't expected to deliver market-beating returns in the near term due to these patent headwinds. But BMS' first-class innovation engine, superb capital allocation strategy, and proven commitment to paying a top-tier dividend all bode well for its long-term prospects. Long story short, BMS stock should generate impressive returns for investors with a 10- to 20-year horizon, given its attractive dividend yield and intriguing deep value proposition.
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George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Bristol Myers Squibb. The Motley Fool has a disclosure policy.