In the immortal words of the late, great entertainer Prince, forever "is a mighty long time." For investors, though 15 to 20 years can practically feel like forever. It can be hard to find stocks you'll feel comfortable holding onto for that long.
However, three Motley Fool contributors think they've identified excellent dividend growth stocks you can buy and hold forever (or at least, the investing version of forever): Abbott Laboratories(NYSE: ABT), AbbVie(NYSE: ABBV), and Johnson & Johnson(NYSE: JNJ).
A Dividend King with an impressive track record that goes back a century
David Jagielski(Abbott Laboratories): When you're looking for good dividend growth stocks to hold for years or even decades, start by looking for businesses with diverse revenue streams and excellent track records of increasing their payouts. Healthcare giant Abbott Laboratories checks off both of those boxes for investors.
At the current share price, its dividend yields just 1.8%, which may look unimpressive at first. However, the company has increased its payouts for 52 consecutive years, making it a Dividend King. Moreover, Abbott has been paying dividends steadily for a century, with its first payment taking place back in 1924. Along the way, the company has delivered dividends to its shareholders despite wars, inflation, economic downturns, and a lot of other turbulence.
Over the past decade, Abbott has increased its quarterly payout by 150%, from $0.22 in 2014 to $0.55 today. The only reason the healthcare stock's yield isn't higher now is because its valuation rose by more than 180% over that same period. When including dividend reinvestment, the total return investors would have achieved from owning shares of Abbott for the past 10 years is around 250%.
Abbott has a slow-and-steady growing healthcare business, and has many opportunities it can pursue. Its growth rate isn't massive, but it is sustainable. And with multiple segments, including pharmaceuticals, diagnostics, medical devices, and nutrition, its operations look solid. Excluding the impact of its COVID-19 testing business, the company is projecting organic sales growth of around 10% this year.
For long-term dividend investors, this could be an ideal stock to buy and forget about.
A stock with something for nearly every investor
Keith Speights (AbbVie): If you like Abbott, you might love AbbVie. The big drugmaker spun off from Abbott in 2013. Since then, it has increased its dividend by a whopping 288%. Thanks to the time it was part of Abbott, AbbVie also qualifies as a Dividend King. At the current share price, its forward dividend yield is 3.3%.
But you don't have to be an income investor to like AbbVie. This stock offers something for nearly every investor.
Want growth? Admittedly, AbbVie's recent growth hasn't been very impressive -- net revenue rose only 4.3% year over year in the second quarter. That relatively low increase was mainly due to declining sales of Humira, which lost U.S. patent exclusivity last year and now faces biosimilar competition. However, the company expects to deliver what CEO Bob Michael referred to in the Q2 earnings call as "top-tier, high single-digit compound growth through the end of this decade."
AbbVie has the products to deliver on this goal. Sales for Rinvoq and Skyrizi -- its two successors to Humira -- are skyrocketing. The launch of the company's new ovarian cancer drug Elahere is going well. Botox continues to generate billions of dollars each year. Sales of migraine drugs Ubrelvy and Qulipta are growing at double-digit percentage rates.
More winners could be on the way. AbbVie's pipeline features more than 90 programs in clinical development, including more than 50 in mid- or late-stage trials.
If you're a value investor, AbbVie could be a better choice for your portfolio than meets the eye. The stock trades at roughly 15.7 times forward earnings, which is well below the S&P 500 healthcare sector's forward earnings multiple of 18.6. Even better, AbbVie's price/earnings-to-growth (PEG) ratio is a super-low 0.45, according to LSEG.
A great income stock for risk-averse investors
Prosper Junior Bakiny (Johnson & Johnson): Pharmaceutical leader Johnson & Johnson has been around for more than 100 years, and it can trace its staying power to several strengths.
First, it has a track record of developing products that enjoy high demand regardless of market conditions. Even when the economy is in the dumps, patients will prioritize getting prescriptions that are vital to their lives and health, which lends stability to Johnson & Johnson's business. Healthcare is described as a defensive industry for a reason.
Second, the healthcare giant has been fantastically innovative. It has a vast portfolio of medicines across therapeutic areas including immunology, oncology, neuroscience, and infectious diseases. The company's pipeline is impressive, too, with several dozen programs underway. Its R&D efforts routinely result in new drug approvals and label expansions.
Third, Johnson & Johnson's business is diversified. In addition to being a top drugmaker, the company is also a leading medical device maker.
Fourth, Johnson & Johnson has a robust balance sheet -- its AAA credit rating from Standard & Poor's is pretty good evidence for that claim. Though it is still facing significant lawsuits and regulatory issues, the company should be fine over the long run. Johnson & Johnson has increased its dividend for 62 consecutive years, and its robust business will help it sustain that streak for many more. Investors looking for a dividend growth stock to hold onto for good can safely opt for Johnson & Johnson.
Should you invest $1,000 in AbbVie right now?
Before you buy stock in AbbVie, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AbbVie wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $860,447!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie. Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
