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3 Best Dividend Kings To Buy For The Long Term


OWhen it comes to finding stocks that pay a dividend, it’s important for investors to focus on companies with strong business fundamentals. This helps ensure that the dividend will be there for years to come. A good place to look for dividend stocks is the Dividend Kings list. This title is awarded to any company that has increased its dividend for at least 50 consecutive years.

At the start of 2022, only 39 stocks qualified as Dividend Kings. Of these, there are three companies that I believe are excellent long-term investments. Johnson & Johnson (NYSE: JNJ) increased its dividend for 59 consecutive years while Abbott Laboratories (NYSE:ABT) and AbbVie (NYSE: ABBV) have been doing it for 50 years. However, their long-standing dividends aren’t the only reasons to add these stocks to your portfolio.

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1. Johnson & Johnson

Johnson & Johnson (J&J) is one of the oldest companies in the healthcare industry, incorporated in 1887. Although the company currently operates in three segments, it plans to transform its consumer healthcare business into its own listed company in stock market, leaving the pharmaceutical and pharmaceutical sectors. medical device segments with the original company. These remaining segments accounted for approximately 84% of total revenue in 2021, so the bulk of J&J’s sales remain with the business.

In 2021, J&J increased revenue by 14% and net profit by 42% compared to 2020. The bulk of revenue came from the pharmaceutical division, which has several drugs on the market that treat a variety of illnesses. However, the medical device segment saw the strongest year-over-year sales growth due to the surge in medical procedures after elective surgeries were largely put on hold during the height of the pandemic.

Management expects continued growth in the pharmaceutical business over the next few years, targeting $60 billion in sales by 2025, which would represent a 15% increase over 2021 revenues.

The company generated $20 billion in free cash flow in 2021, easily providing enough cash to cover its dividend and raise it again to remain a dividend king. J&J is one of those stable, fundamental stocks that can anchor any portfolio while its dividend yields a healthy 2.4%.

2. Abbott Laboratories

Not as old as Johnson & Johnson, Abbott Labs was incorporated in 1900. It develops, manufactures and sells a wide range of pharmaceuticals, diagnostics, nutritional products and medical devices. Abbott was in the spotlight recently because it is a provider of rapid COVID-19 tests, but the company also produces many well-known consumer products such as Similac infant formula and Ensure protein drinks.

2021 saw strong results for Abbott, with revenue up 25% over 2020. This growth was largely driven by the diagnostics segment, which grew 45% year-over-year and includes revenue from COVID testing. While the company expects these COVID-related revenues to remain strong for the foreseeable future, it is important to note that excluding COVID-related sales, the diagnostics segment still increased revenues by 13% in 2021.

With a dividend yield of 1.5%, Abbott slightly exceeds the S&P500yield of 1.4%. Perhaps more importantly for potential investors, Abbott is currently trading at five times its sales, close to its mid-2020 multiple. This provides an attractive entry point for potential investors.

3. AbbVie

AbbVie can claim Dividend King status because of its history with Abbott Labs. That said, the company has continued to increase its dividend every year since its spin-off from Abbott in 2013. Focusing on immunology, hematological oncology, neuroscience, aesthetics and eye care, AbbVie has experienced a success as a public company, outpacing Abbott by about 67% since the spin-off.

In 2021, AbbVie grew revenue by 23% and adjusted earnings per share (EPS) by 20%. This was driven by AbbVie’s blockbuster drug, Humira, which brought in over $20 billion in sales in 2021. Unfortunately, AbbVie will face competition for Humira as it loses patent exclusivity in 2023. Fortunately, the recent acquisition of Allergan brings Botox into the fold. Botox cosmetics revenue increased 98% in 2021 and Botox therapeutic revenue increased 75%.

AbbVie’s price-to-sales ratio is 5, similar to the multiple of Johnson & Johnson and Abbott Labs. However, unlike those two, it has trended higher and is now the highest since mid-2018. On the other hand, over the past three years, AbbVie has grown its revenue at the fastest rate of the three, making the current valuation look more like a theft than a concern.

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Jeff Santoro owns Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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