How would you like to get paid every quarter (and sometimes every month) to own a stock? That's exactly what happens when you invest in dividend stocks. Sometimes, the amount you are paid to own these stocks can be very attractive.
Three Motley Fool contributors believe they've found stocks you can buy right now that have mouthwatering dividends. Here's why they picked AbbVie(NYSE: ABBV), Bristol Myers Squibb(NYSE: BMY), and Pfizer(NYSE: PFE).
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A top dividend stock for the long haul
Prosper Junior Bakiny (AbbVie): Several factors make for an above-average dividend stock. AbbVie, a pharmaceutical company, checks many of those boxes. Consider the company's forward yield, which currently tops 3.5% versus the 1.3% average for the S&P 500. Although a stock can be attractive for dividends with a relatively low yield, income seekers often like juicy ones, and AbbVie's is.
We can also point to AbbVie's fantastic track record. The company is a Dividend King with an active streak of 53 consecutive payout increases. That suggests AbbVie is unlikely to slash its payouts anytime soon, as doing so would force the company to start the streak from scratch and maybe rejoin this exclusive club in another 50 years. Of course, AbbVie might be forced to cut its dividends if the business faces significant headwinds. However, that's yet another area where the company excels, which makes it a top dividend stock.
AbbVie is a leading drugmaker with a deep lineup of products that generate consistent revenue and earnings. Some of the company's medicines continue increasing their sales at a good clip. AbbVie's two biggest growth drivers are Skyrizi and Rinvoq, a pair of immunology medicines. These therapies have surprised even the company's management, which recently increased Skyrizi and Rinvoq's combined 2027 guidance by $4 billion to more than $31 billion.
AbbVie's lineup features several other key products, including its Botox franchise. And although it will face patent cliffs, as every drugmaker does, AbbVie also has a deep pipeline of investigational compounds that will eventually allow it to move beyond its current crop of therapies. All these things (and more) make AbbVie an attractive dividend stock. Income investors can safely add shares of the company to their portfolios and hold on to them for a long time.
Bristol Myers stock pays 5% and has underrated growth potential
David Jagielski(Bristol Myers Squibb): A dividend stock that income investors might want to consider loading up on right now is that of pharma giant Bristol Myers Squibb. It currently yields 5.1%, which is a higher-than-typical payout for this top healthcare company. At such a high yield, you may be concerned that it's unsustainable, but that's not the case.
The company's fundamentals are sound. In the trailing 12 months, Bristol Myers generated free cash flow totaling $13.1 billion, which is more than double the amount it has paid out in cash dividends during that stretch ($4.9 billion). In each of the past four years, Bristol Myers' free cash flow has totaled at least $11 billion.
The company has been struggling with growth in recent years due to rising competition and the loss of patent protection on key drugs. But its growth portfolio has been giving investors a reason to remain optimistic. Through the first three months of the year, its non-legacy products generated year-over-year growth of 18% when excluding foreign exchange.
Bristol Myers has been a solid name in healthcare for years, and while it's facing adversity, it's still growing. Last year, it obtained approval for schizophrenia drug Cobenfy, which may generate peak sales of up to $10 billion, according to some analysts.
At 18 times trailing earnings, this can be a great, cheap dividend stock to add to your portfolio today.
A safer dividend than initially meets the eye
Keith Speights (Pfizer): Investors are right to be at least somewhat skeptical when they see a stock with a super-high dividend yield. For example, Pfizer's forward dividend yield is 7.38%. Is a dividend cut on the way for the big pharmaceutical company? I don't think so.
Granted, Pfizer's dividend payout ratio of 122.5% might seem worrisome. However, the company generates enough free cash flow to cover its dividend at the current level. The amount of free cash flow could also increase as a result of Pfizer's cost-cutting initiatives. The drugmaker's dividend is safer than initially meets the eye, in my view.
I believe Pfizer's underlying business is also stronger than it might look at first glance. It's easy to focus only on the negatives. There are several, including a steep decline in COVID-19 product sales, some notable pipeline setbacks, the upcoming loss of exclusivity for multiple top-selling drugs, and the Trump administration's threats of tariffs on pharmaceutical imports.
But Pfizer has plenty of positives that offset those negatives. For one thing, I think its valuation more than reflects all the challenges, with shares trading at only 8 times forward earnings. The company also has several new products with fast-growing sales and a robust pipeline.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie, Bristol Myers Squibb, and Pfizer. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Bristol Myers Squibb, and Pfizer. The Motley Fool has a disclosure policy.
