There are many dividend stocks on the market. Some will end up reducing or suspending their payouts due to business-specific, economic or broader market issues. These are not the kind of dividend stocks that investors will want to own. Instead, income seekers should try to find companies that have excellent underlying businesses and are likely to maintain their dividend program for a long time.
Find out why three Motley Fool contributors were chosen Elie Lilly (NYSE:LLY), AbbVie (NYSE:ABBV)And Novartis (NYSE:NVS) as excellent passive income stocks that investors can hold safely.
Growth and Dividend Investors Don’t Need to Look Elsewhere
Prosper Junior Bakiny (Eli Lilly): Few pharmaceutical companies have made as much noise as Eli Lilly in recent years. The company is proving to be an innovative powerhouse with major approvals such as Mounjaro in diabetes, Zepbound in obesity and, potentially, donanemab, which could gain the green light in the treatment of Alzheimer’s disease.
Eli Lilly’s financial results may have been somewhat inconsistent over the past two years, but that was due to its coronavirus-related ups and downs in sales. Now that this market no longer impacts its revenue growth, the company should head straight north for years to come. Eli Lilly is one of the most attractive – and growth-oriented – companies in the sector, and that’s what makes it an attractive option for dividend investors.
Granted, the company’s forward yield of 0.67% isn’t impressive. But this is due to the stock’s recent rise. The dividend itself is not far behind. Eli Lilly has increased its payouts by just over 100% over the past five years. The business should not stop there. Thanks to the slew of new approvals received, analysts predict that Eli Lilly’s earnings per share (EPS) will increase by an average of 56% over the next five years.
Try to find a pharmaceutical giant whose projected EPS growth even comes close to this total. There aren’t many, if any. Eli Lilly will make a lot of money, some of which it could, and certainly will choose, to return to shareholders. So, investors can sit back and enjoy the ride, as Eli Lilly offers incredible top and bottom line growth, market-beating returns, and an attractive dividend program.
A dividend king with solid growth prospects
Keith Speights (AbbVie): You won’t find many stocks with a better dividend program than AbbVie. The drugmaker is a dividend king with 52 consecutive dividend increases (including the years it was part of Abbott). Over the past 10 years, AbbVie has increased its dividend by 269%. Its dividend yield currently stands at almost 3.8%.
Although AbbVie has been and will certainly continue to be a passive income machine, there is more to like about the stock than its dividend. The company may have surprisingly good growth prospects, given that sales of its top-selling blockbuster drug, Humira, are rapidly declining due to generic competition.
AbbVie expects to return to solid sales growth next year. It projects a high single-digit compound annual revenue growth rate for the rest of the decade. Two successors to Humira, Rinvoq and Skyrizi, are key to this expected growth. AbbVie’s forecast calls for more than $27 billion in combined therapy sales by 2027. That’s well above what Humira generated at its peak.
The major biopharmaceutical company also has other growth drivers. Sales of the antipsychotic Vraylar are expected to approach $5 billion a year. AbbVie’s migraine therapies are expected to exceed combined sales of $3 billion at their peak. Sales of the drugmaker’s aesthetic portfolio are expected to exceed $9 billion by 2029.
We cannot ignore AbbVie’s negotiating efforts. The recent acquisition of ImmunoGen and the ongoing buyout of Cerevel Therapeutic will add several potentially significant winners to AbbVie’s lineup.
Novartis is a reliable growth stock with high yield
David Jagielski (Novartis): Novartis is a healthcare stock that is currently a high-earning investment. The Swiss-based pharmaceutical company has a strong financial position, pays high dividends and is always looking for more growth.
If you buy the stock today, you’ll get a dividend yield of 3.9%, almost three times that of the stock. S&P500 average of 1.4%. The company has also rewarded its shareholders with regular raises; Novartis has increased its dividend payments for 27 consecutive years.
In each of the last four years, the company generated free cash flow of at least $11 billion, which is well above the $7.3 billion it paid in dividends in 2023, giving Novartis has enough room to balance both dividend payments and growth. initiatives.
Last year, the company spun off its generics and biosimilars business, Sandoz, to focus more on growth. And until 2027, Novartis expects to be able to generate annual growth of 5% per year. In 2023, Novartis reported annual revenue of $46.7 billion, 7% higher than the $43.5 billion reported the previous year. The company has many interesting drugs in its portfolio, including breast cancer drug Kisqali, which could generate peak sales of $4 billion.
As Novartis continues to grow its business and cash flow, the company will have more room to continue distributing more cash to its shareholders. At just 13 times estimated future earnings, Novartis is a low-priced stock that can generate plenty of recurring income for investors willing to hang on for the long haul.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights holds positions within AbbVie. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool features and recommends Abbott Laboratories and CorVel. The Motley Fool has a disclosure policy.
3 Great Stocks That Are Passive Income Machines was originally published by The Motley Fool
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