If you're an income-seeking investor who doesn't plan on retiring soon, I have some great news: The following three dividend stocks have a record of rapidly raising their payouts, and they're poised to keep going.
Strong advantages against competitors allowed these companies to rapidly raise their dividends in recent years, and they're still in place. Here's why adding them to a diverse portfolio looks like a great way to set yourself up with a huge passive income stream once you're ready to retire.
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1. UnitedHealth Group
If you're looking for an industry you can rely on for steady growth, it's hard to do better than the U.S. healthcare system. Every day, around 10,000 baby boomers turn 65. The growth rate of America's Medicare-eligible population will subside for several years after the last baby boomer turns 65 in 2029, but only slightly.
As America's largest health insurance benefits manager, UnitedHealth Group (UNH 0.30%) is a reliable way to ride the trend toward increasing healthcare expenses. It has also been incredibly lucrative for long-term investors. The stock has delivered an outstanding 1,860% total return since the Affordable Care Act became law in 2010.
At recent prices, UnitedHealth shares offer a measly 1.4% dividend yield. The health insurer raises its payout so fast, though, that it could be a top source of passive income in your retirement years. It has more than doubled since 2019 and is up 571% over the past decade.
UnitedHealth reported earnings that rose 13.8% last year, and investors can reasonably expect more rapid profit growth. That's because it's not only America's largest health insurance benefits manager, it's also the country's largest employer of physicians. This gives the company a lot of chances to directly provide the benefits it's also paid to manage.
2. AbbVie
Aging demographics bode well for drug sales, and it's hard to find a better pharma stock right now than AbbVie (ABBV -4.58%). It offers a 3.5% dividend yield at recent prices.
AbbVie's quarterly payout is up by 269% over the past decade. Dividend growth is tapering off due to the loss of U.S. market exclusivity for its former lead drug, Humira, early last year.
In the fourth quarter, U.S. sales declined by 45% year over year to an annualized $11 billion. Despite collapsing U.S. Humira sales, total revenue during the quarter shrank just 5% thanks to huge contributions from two newer drugs that launched in 2019, Skyrizi and Rinvoq.
Thanks to Skyrizi, Rinvoq, and a handful of more recently launched drugs, AbbVie expects total sales to return to growth in 2025 despite Humira's impending losses. Combined sales of Skyrizi and Rinvoq reached $11.7 billion in 2023, and management expects this figure to exceed $27 billion in 2027.
With Rinvoq, Skyrizi, and other new products to keep moving the needle, investors can look forward to at least another decade of rapid dividend growth from this industry leader.
3. Abbott Laboratories
AbbVie was Abbott Laboratories' (ABT 0.63%) pharmaceutical division until 2013. It's still a healthcare conglomerate that develops and markets medical technology, diagnostics, and nutrition products. Abbott's stock offers a 1.8% yield at recent prices. That isn't attractive to start with, but it has risen by 72% over the past five years.
The rapid decline of COVID testing limited revenue growth to 1.5% in 2023. If we exclude sales of coronavirus diagnostics, though, revenue rose 11% in 2023, and this could be another big year. Management expects total revenue to climb 8% to 10% in 2024 driven in large part by medical devices.
The Food and Drug Administration approved the Freestyle Libre 3 in 2022, and sales of the blood sugar monitor are still growing fast. In the U.S., diabetes-care revenue soared 30.3% last year.
The Freestyle Libre 3 is just one of several growth drivers in Abbott's extensive portfolio, but the stock has been trading at 25.9 times forward earnings estimates. That's a fair price to pay for a company that could grow its top and bottom lines by a high single-digit percentage in the decade ahead.
