Owning dividend stocks comes with significant advantages. More than 5,000 stocks listed on U.S. exchanges distribute a portion of their profits to shareholders in the form of dividends. While not all of them are ideal investment choices at the moment, some are undeniably strong picks. Three Fool.com contributors have shared their recommendations for no-brainer dividend stocks to consider buying in September. They highlighted healthcare giants AbbVie (ABBV), Merck (MRK), and Pfizer (PFE). Here's a detailed look at why these companies stand out.
AbbVie stands out as a dividend powerhouse with substantial growth prospects. Contributor Keith Speights notes that AbbVie is one of the elite Dividend Kings in the healthcare sector, boasting over 52 consecutive years of dividend increases. The company’s forward dividend yield currently sits at 3.2%, a figure slightly lower than in previous years due to the stock’s impressive 20% rise this year. This performance is a testament to AbbVie's robust growth potential. Despite declining sales for Humira, AbbVie has a solid plan in place. Its successors, Rinvoq and Skyrizi, are projected to surpass Humira’s peak annual sales in the coming years.
AbbVie’s acquisition of Allergan in 2020 also brought in key growth drivers like Qulipta, Ubrelvy, and Vraylar. With more than 90 programs in clinical development, including over 50 in mid- or late-stage testing, AbbVie expects high-single-digit growth through the decade, providing long-term value to its investors.
Merck, another top pick, has much to offer despite looming patent cliffs. Contributor Prosper Junior Bakiny points out that Merck is a global leader with a diverse portfolio, but its name is often synonymous with its blockbuster cancer drug, Keytruda. The drug, which became the best-selling medicine globally last year, is set to lose its patent protection in 2028. Investors are concerned about the impact of this patent loss on Merck’s business and dividends.
However, Merck's financial health remains strong, with a 7% year-over-year revenue increase to $16.1 billion in the second quarter and earnings per share of $2.14. Over the last decade, Merck’s dividend has risen by 75% and now offers a forward yield of 2.64%. The company is actively developing a subcutaneous version of Keytruda anticipated to generate $8 billion in revenue by 2030, alongside several other successful products and a rich pipeline. Given these factors, Merck remains a solid income stock to buy and hold.
Lastly, Pfizer offers a high-yield dividend with considerable upside potential. Contributor David Jagielski highlights that Pfizer's current dividend yield is around 6%, significantly higher than the S&P 500 average of 1.3%. The company has consistently raised its dividend since 2010, despite facing upcoming challenges such as patent expirations and declining COVID-related revenues.
Pfizer aims to counteract these pressures through strategic acquisitions, notably its $43 billion purchase of Seagen, an oncology company. The company is investing heavily in new product launches and projects that, by the end of the decade, it will not only recover the anticipated $18 billion revenue loss from patent expirations but also add $25 billion through new acquisitions and products.
Although investor confidence in Pfizer has waned, reflected in a 20% drop in stock price in the past 12 months, patient investors could see significant rewards as the company navigates these challenging times, potentially leading to future stock price rallies.
In summary, AbbVie, Merck, and Pfizer represent compelling dividend investment opportunities this September. Each company has unique strengths, solid growth plans, and a history of rewarding shareholders with increasing dividends.
