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2 Stocks to Buy With Dividends Yielding More Than 3%

By Rich Duprey - Updated May 28, 2021 at 10:46AM

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In turbulent times, these two dividend giants can see you through.

The increasing volatility we're seeing in stocks signals to some we may be approaching a market peak. Even with the economy chugging back to life toward a summer of near-normalcy in the U.S., there are indications investors may want to be a bit more defensive.

Buying dividend-paying stocks is a smart strategy regardless of the environment -- but in a potentially down market, income-generating stocks are a particularly good play. Plus, the two stocks below give investors hope for a bit of growth.

Piggy bank with a crown

Image source: Getty Images.

1. AbbVie

The brilliance of an investment in pharmaceutical giant AbbVie (ABBV -0.22%) has been the growth of its rheumatoid arthritis treatment, Humira, the global best-selling drug for the past two decades. Still the single biggest contributor to the pharma company's revenue, it generated $19.8 billion for AbbVie in 2020, or 43% of its total $45.8 billion.

Of course, now that some of the important patents protecting Humira have expired, the drug is facing biosimilar competition in Europe and will begin facing it in the U.S. in 2023. Yet as the clock ticks down on Humira's exclusivity, investors should be comforted that AbbVie hasn't sat still. The business has a portfolio of robust therapies available, including Humira's successor, ABBV-3373, which my Foolish colleague Brian Orelli has described as "Humira on steroids (literally)."

Management recently announced they would be showcasing just how deep their bench is regarding rheumatology with a presentation to be delivered to the EULAR 2021 Virtual Congress of Rheumatology in the first week of June. There seems little reason to fear that AbbVie will relinquish its position atop the field. 

AbbVie's annual dividend of $5.20 per share currently yields 5.4% and looks to remain as safe as ever. When other companies have cut or suspended their dividends, AbbVie's payout remained intact. It increased the payout by more than 10% to kick off 2021, and has raised the dividend by an average compounded rate of 18% annually for the past five years.

With a payout ratio of less than 50%, the pharmaceutical stock has plenty of safety and room for future dividend hikes.

2. Amcor

Packaging specialist Amcor (AMCR 1.72%) is not a stock that immediately jumps to mind when thinking of downside protection in a volatile market.

The maker of rigid and flexible packaging for food, beverages, pharmaceuticals, and personal care products is in an industry that may not be sexy, but it's vital: Especially in a reopened economy, its products cut across huge swaths of the market and should be in high demand.

Its fiscal third-quarter earnings reported earlier this month indicate that seems to be the case, with year-to-date revenue rising 1% to $9.4 billion, but adjusted earnings per share jumping 16% from the year ago period. Amcor also raised its guidance for full-year per-share earnings to rise 14% to 15% from its previous outlook of 10% to 14% gains.

Amcor isn't a stock for investors looking for a stratospheric expansion of value, but rather one of steady, stable increases. Its stock did plunge during the COVID-19 outbreak, but it regained all the kost ground within weeks -- its business wasn't impacted all that much because the markets it sells into are essential ones themselves.

Amcor is looking to its 2019 acquisition of fellow plastic packaging and products maker Bemis to drive future growth. It gave the U.K.-based Amcor an extensive U.S. manufacturing base while also generating significant cost synergies, some $55 million this year so far. Amcor expects the acquisition to deliver at least $180 million worth by the end of the next fiscal year. 

The packaging specialist pays a dividend yielding 4% annually, and has raised the payout every year for 25 consecutive years, making Amcor a Dividend Aristocrat, a bit of extra security for investors looking for stocks to tide them over periods of uncertainty.

Rich Duprey owns shares of Amcor plc. The Motley Fool owns shares of and recommends Amcor Limited. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AbbVie Inc. Stock Quote
AbbVie Inc.
$142.29 (-0.22%) $0.31
Amcor plc Stock Quote
Amcor plc
$13.03 (1.72%) $0.22

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