Three Motley Fool contributors have dividends on their minds as the second quarter of 2024 begins. And they think they’ve found some no-brainer dividend stocks to buy in April. Here’s why they like AbbVie (NYSE: ABBV), Gilead Sciences (NASDAQ: GILD), and Pfizer (NYSE: PFE).
One of the most attractive dividends around
Keith Speights (AbbVie): What’s better than a high-dividend yield? I’d say a high-dividend yield combined with a growing dividend. That’s exactly what you’ll get with AbbVie.
Let’s start with the biopharmaceutical company’s dividend yield of nearly 3.6%. High yields aren’t unusual for AbbVie. The yield has topped 3% throughout most of its history.
Few companies can compete with AbbVie on dividend growth. AbbVie has boosted its dividend payout by nearly 288% since separating from Abbott Labs in 2013. The big drugmaker is a Dividend King with 52 consecutive years of dividend increases (42 of those years were while it was part of Abbott).
Can AbbVie keep this dividend growth going? I think so. The company expects to generate free cash flow of around $18 billion this year. It paid $10.5 billion in dividends in 2023.
Sure, AbbVie’s revenue and profits have declined with the loss of U.S. exclusivity for its best-selling drug, Humira. However, the company is confident about returning to revenue growth next year “with a high single-digit CAGR [compound annual growth rate] through the end of the decade.”
I agree with that positive outlook. Humira’s two successors — Rinvoq and Skyrizi — should together eclipse Humira’s peak annual sales. AbbVie has other key rising stars, including migraine drugs Ubrelvy and Qulipta. The company’s acquisitions of ImmunoGen and Cerevel Therapeutics should fuel additional growth.
Gilead’s high yield and stability make it a great option for income investors
David Jagielski (Gilead Sciences): Gilead Sciences is a top healthcare stock that investors can safely add to their portfolios this month. The drugmaker has a strong core HIV treatment business which puts it in a great position to generate consistent results given the ongoing need for treatment. In each of the past three years, the company’s revenue has been around $27 billion. And while its bottom line has shown a bit more variability, earnings have typically been at least 16% of sales.
Stability and consistency are what income investors can expect from Gilead. This is a low-volatility stock that won’t go on wild swings along with the market. While that means that your returns may not be great from owning the stock, for dividend investors, that can provide you with some fantastic stability. And although the business is stable, that doesn’t mean Gilead isn’t growing. It has been expanding its oncology business, which grew at a rate of 37% last year.
The stock currently pays investors a dividend yield of 4.2%, which is about three times the S&P 500 average of 1.4%. Gilead has also been boosting its payouts in recent years. Five years ago, the company was paying investors a quarterly per-share dividend of $0.63. Since then, it has risen by 22%.
The company has a high-dividend yield, a sustainable payout ratio of less than 70%, and it trades at just 10 times its estimated future profits (based on analyst expectations). All in all, the stock checks off a lot of boxes for dividend investors and can be an excellent long-term buy.
An attractive dividend stock at a fair price
Prosper Junior Bakiny (Pfizer): Can anything else go wrong for Pfizer? Last year, the company’s shares took a tumble — along with its revenue and earnings — as sales of its COVID-19 products declined.
The drugmaker isn’t doing any better this year. The stock is still southbound despite solid recent regulatory progress on multiple drug candidates. Pfizer earned seven brand-new approvals last year, a leading number in the industry by a mile. No other pharmaceutical company had more than three.
Pfizer’s newly rejuvenated portfolio will help it get past its current COVID-19-related doldrums. It might take a while, but on the stock market, patience is often rewarded. Pfizer isn’t finished making innovations. The company’s pipeline features 112 candidates, including 31 in late-stage studies. It’s not rare for drugmakers to go through periods of declining sales. Pfizer’s recent rough patch is, perhaps, for the best possible reason. It delivered record-breaking revenue in 2021 and 2022, not just by its standards.
Pfizer became the first biopharmaceutical company to hit $100 billion in annual sales in 2022. The company may not get back there anytime soon, but it should remain well above its pre-COVID-19 levels in terms of revenue. Meanwhile, Pfizer offers a juicy dividend yield of 6.1% and has raised its payouts by 61.5% in the past decade.
Lastly, Pfizer looks reasonably valued, with a forward price-to-earnings ratio of 12.3, compared to 18.1 for the pharmaceutical industry. For long-term investors, the drugmaker looks like a no-brainer dividend stock to buy and hold.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie and Pfizer. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Gilead Sciences, and Pfizer. The Motley Fool has a disclosure policy.
3 No-Brainer Dividend Stocks to Buy in April was originally published by The Motley Fool
