There are many dividend stocks on the market. Some will end up cutting or suspending their payments due to company-specific, economic or broader market issues. These are not the type of dividend stocks that investors will want to own. Instead, income seekers should try to find companies with excellent underlying businesses that are likely to maintain their dividend program over a long period of time.
Find out why three Motley Fool contributors were chosen Eli Lilly (NYSE: LLY), AbbVie (NYSE: ABBV)It is Novartis (NYSE: NVS) as excellent passive income stocks that investors can safely hold.
Growth and Dividend Investors Need Look No Elsewhere
Prospero 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 important approvals such as Mounjaro for diabetes, Zepbound for obesity and, potentially, donanemab, which could be approved to treat Alzheimer’s disease.
Eli Lilly’s financial results may have been somewhat inconsistent over the past two years, but that was due to ups and downs in coronavirus-related sales. Now that this market is no longer affecting its revenue growth, the company should be on a straight march north for years. Eli Lilly is one of the most attractive companies – and growth-oriented companies – in the industry, and that’s what makes it an attractive option for dividend investors.
Granted, the company’s forward yield of 0.67% is not impressive. But that’s because of how much the stock has gained recently. The dividend itself was not left behind. Eli Lilly has increased its payments by just over 100% over the past five years. The company shouldn’t stop there. Thanks to the series of new approvals obtained, analysts predict that Eli Lilly’s earnings per share (EPS) will grow at an average of 56% over the next half decade.
Try to find a pharmaceutical giant whose projected EPS growth comes close to this total. There aren’t many, if any. Eli Lilly will make a lot of money, some of which could, and will certainly choose, to return to shareholders. So investors can sit back and enjoy the ride as Eli Lilly delivers incredible top-line 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 pharmaceutical company is a Dividend King with 52 consecutive dividend increases (including the years in which it was part Abbott). Over the past 10 years, AbbVie has increased its dividend by 269%. Its dividend yield is currently at almost 3.8%.
While AbbVie has been and will almost certainly continue to be a passive income machine, there is more to like about the stock than just its dividend. The company has perhaps surprisingly good growth prospects, considering that sales of its blockbuster drug, Humira, are declining rapidly 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 anticipated growth. AbbVie’s guidance is for more than $27 billion in combined therapy sales by 2027. That’s well above what Humira generated at its peak.
The big biopharmaceutical company also has other growth engines. Sales of the antipsychotic drug Vraylar are expected to approach $5 billion annually. AbbVie’s migraine therapies are expected to surpass combined sales of $3 billion at their peak. Sales of the pharmaceutical company’s aesthetic product portfolio are expected to exceed US$9 billion by 2029.
We cannot ignore AbbVie’s negotiation efforts. The recent acquisition of ImmunoGen and the pending acquisition of Cerevel Therapeutics will add several potentially big winners to AbbVie’s lineup.
Novartis Is a Reliable Growth Stock with High Yield
David Jagielski (Novartis): One healthcare stock that represents a high-income investment right now is Novartis. The Swiss-based pharmaceutical company has strong financials, pays high dividends and is always looking for more growth.
If you buy the shares today, you’ll get a 3.9% dividend yield – that’s almost three times the S&P 500 average of 1.4%. The company has also been rewarding its shareholders with regular raises; Novartis has increased dividend payments for 27 consecutive years.
In each of the last four years, the company has generated free cash flow of at least $11 billion, which is much higher than the $7.3 billion it paid in dividends in 2023, giving Novartis a margin enough to balance dividend payments and growth. initiatives.
Last year, the company spun off its generics and biosimilars business, Sandoz, to focus more on growth. And by 2027, Novartis predicts it will be able to generate annual growth of 5% per year. In 2023, Novartis reported annual sales of $46.7 billion, 7% higher than the $43.5 billion reported in 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 operations and cash flow, there will be more room for the company to continue distributing more cash to its shareholders. At just 13 times its estimated future earnings, Novartis is a low-priced stock that can generate a lot of recurring income for investors who are willing to persevere for the long term.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights holds positions at AbbVie. Prospero Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Abbott Laboratories and CorVel. The motley fool has a disclosure policy.
3 Magnificent Stocks That Are Passive Income Machines was originally published by The Motley Fool
