Preferred Dividend Titan I Recommend Purchasing in November
Preferred Dividend Titan I Recommend Purchasing in November
Certifications like the Good Housekeeping Seal help consumers identify secure and top-performing items. Unfortunately, no similar label exists for dividend stocks. Nevertheless, the top-tier organization known as Dividend Kings serves a similar function. To become a Dividend King, a company must increase its dividend for at least 50 consecutive years. This fact gives income investors peace of mind, knowing they hold a stock with a sturdy dividend history.
Not all Dividend Kings are created equal. So, which one is the ideal pick currently? Allow me to express my fervor for this particular Dividend King.
Prolonging its dividend boosts
Although AbbVie (ABBV 0.06%) didn't come into existence until 2013, this large pharmaceutical company is not excluded from the Dividend King title. AbbVie was once a division of Abbott Laboratories for decades before being spun off as a separate publicly traded company 11 years ago.
Thus, AbbVie carries on the renowned dividend legacy of its parent. In September, Abbott declared its 52nd consecutive yearly dividend increase. Recently, AbbVie also announced its latest dividend increase.
While many Dividend Kings have longer streaks of dividend enhancements than AbbVie, few, if any, can match its recent dividend growth rate. Since its spinoff from Abbott, AbbVie has significantly increased its dividend payout by an astounding 310%.
Not all Dividend Kings offer outsized dividend yields. However, AbbVie's anticipated dividend yield is 3.26% - nearly 2.7 times higher than the yield of the S&P 500 (^GSPC -0.07%). AbbVie's yield would be even higher if its share price hadn't soared 30% this year.
Full speed ahead
I believe AbbVie's success will continue. Some investors have fretted about the impact of Humira, AbbVie's leading drug, with its expired patent exclusivity last year. I, however, remain unwavering in my belief in AbbVie's strategy to surmount these hurdles, and it seems my confidence is justified.
In the third quarter of 2024, Humira's sales decreased 36.5% year over year due to biosimilar competition. Yet AbbVie's overall revenue increased, surpassing expectations by $260 million. How did AbbVie accomplish this feat? By enhancing its research and development and strategically acquiring companies.
AbbVie CEO Rob Michael stated during the Q3 earnings call that the company anticipates Humira's successor products, Skyrizi and Rinvoq, to earn combined sales of over $17 billion this year. He added, "[W]e see substantial opportunity for continued strong growth well into the next decade."
Other major growth catalysts for AbbVie stemmed from its business development deals. For instance, AbbVie's acquisition of Allergan in 2020 added migraine therapies Qulipta and Ubrelvy, as well as antipsychotic drug Vraylar, to its product catalog. All three drugs exhibited double-digit percentage sales growth in Q3.
AbbVie remains committed to investing in research and development. Its pipeline encompasses over 90 programs. AbbVie's investments have recently proven successful with the approval of Parkinson's disease drug Vyalev by U.S. regulators.
Michael mentioned during the Q3 call that AbbVie completed 15 deals so far this year, including the recent acquisition of Cerevel Therapeutics. CFO Scott Reents noted that the company's "strong free cash flow also offers capacity for additional business development."
AbbVie's finishing touch
Though many stocks are overvalued nowadays, AbbVie's valuation remains enticing despite its substantial gains. Shares trade at 16.9 times forward earnings. Even better, the stock's price-to-earnings-to-growth (PEG) ratio based on five-year growth projections is an ultra-low 0.47, according to LSEG.
AbbVie delivers a sizable dividend yield, a remarkable history of dividend increases, promising growth prospects, and an inviting valuation. It should be unsurprising that the stock is my top pick for Dividend King purchases at present.
In the context of investing and finance, AbbVie's recent dividend increase marked its 52nd consecutive yearly dividend increase, setting it apart among Dividend Kings with a high dividend growth rate. Despite its share price increase by 30% this year, AbbVie's anticipated dividend yield is still significantly higher than the S&P 500's yield.
AbbVie's strong performance is underpinned by its strategic moves, such as enhancing research and development and acquiring companies, as well as the successful launch of its Humira successors and the addition of new products through business development deals. This robust growth, coupled with its low PEG ratio and impressive dividend history, makes AbbVie an attractive choice for income investors in the current market.