There's no denying growth stocks can be a lot of fun to own, not to mention rewarding. There's also no denying, however, sometimes volatile growth names aren't always the best option for everyone. Many investors prefer the stability that only value-oriented equities can offer, and some investors need to live on reliable income produced by at least part of their portfolio.
If you're one of these income-minded investors (or find yourself increasingly moving in that direction), here are three blue-chip dividend-paying stocks you should put on your watch list.
1. AbbVie
Current dividend yield: 4.5%
It's possible you're more familiar with pharmaceutical maker AbbVie's (ABBV 1.05%) flagship drug than you are with the company itself. AbbVie is the name behind arthritis and Crohn's disease drug Humira, which accounted for more than 40% of the company's 2020 revenue of $45.8 billion.
Image source: Getty Images.
Such a singularly successful drug is a double-edged sword, of course. Once the drug's patents start to expire, revenue plummets. Humira's patent protection will start to deteriorate in earnest in 2023 and progressively weaken over the course of the next several years. This looming problem has been working against the stock's price since 2018, even though we've seen the occasional burst of bullishness from it in the meantime. Investors are afraid AbbVie's dividend is in jeopardy.
The concern is understandable, but not necessarily merited. The pharmaceutical company has several dozen drug trials underway, including nearly 30 Phase 3 trials examining different configurations of about a dozen different drugs. Its Rinvoq, Skyrizi, Venclexta, and Imbruvica -- each already approved for at least one use -- are especially well represented in AbbVie's pipeline of trials looking for additional uses of these proven therapies.
It's unlikely the organization will ever be able to replace Humira with a single drug franchise. But it doesn't need to. AbbVie expects Rinvoq and Skyrizi combined to drive $15 billion worth of sales in 2025, up from just a couple billion dollars worth of annual sales now -- and that may be a conservative estimate. Venclexta and Imbruvica could be similarly explosive.
The point is, this drugmaker's preparing for life after Humira even if many investors don't see it.
2. Coca-Cola
Current dividend yield: 3%
Coca-Cola (KO 0.78%) isn't a company that needs an introduction. The brand name's been around for well over a century, and it is the world's biggest non-alcoholic beverage producer by market cap.
This size and pedigree hasn't always helped. Most of Coke's operations ran into a COVID-19-prompted logistics headwind around the middle of last year, and the company was powerless to do much about it. The worldwide shift away from sugary drinks and toward healthier options also hasn't played into Coca-Cola's strengths. It may own Dasani water and Minute Maid juices, but competition in those categories is a bit stiffer than it is within the carbonated beverage market. Astute investors will likely know that Coca-Cola's top line has been gradually shrinking for a few years now.
That latter detail, however, is by design, largely for reasons meant to help it adapt to changing consumer tastes.
It was a strategic shift that's been obscured by the noise of the pandemic, but several years ago Coca-Cola began selling bottling operations back to bottlers themselves, continuing to do so even through 2019. The company instead wished to focus more on franchising and licensing. The change reduces revenue, as the bottlers themselves become the suppliers to retailers and the food-service industry. But, in that beverage licensing is a higher-margin business than wholesaling drinks, the Coca-Cola Company was ultimately positioning itself to produce a bigger bottom line.
It worked. In spades. The company's making more than enough to easily fund the current dividend payments, with last quarter's operating profit coming in at $0.68 per share versus the current quarterly payout of only $0.42. There's lots of promise for future dividend growth under the new model, too.
3. Edison International
Current dividend yield: 4.6%
Finally, add Edison International (EIX 1.84%) to your list of dividend stocks to consider, if you're an income investor looking for a new position for your portfolio.
At first glance, Edison International doesn't look too terribly different than other names in the utility sector. And by most standards, it isn't. Its primary market is Southern California, but other than that, it delivers electricity pretty much like any other power producer. There are a couple of important details about Edison International, however, that make it a more compelling dividend option.
One of those differences is the yield. At 4.6%, the stock's currently suppressed price translates into one of the higher-yielding payers in the utility business without any greater degree of risk than other options.
The other nuanced but noticeable difference between Edison and its peers is Edison's embrace of the inevitable green, clean, renewable-driven energy future. The company's aiming for a completely carbon-neutral operation by 2045, and more than that, it's laid out a detailed plan of action to reach that goal. It's not just about smarter, cleaner power provision. Edison International's primary subsidiary, Southern California Edison, is working closely with the state to meet its long-term decarbonization goals with highly localized solutions. For example, last month the company announced plans to install 38,000 EV charging stations in southern California. In June Edison completed about 200 miles' worth of transmission lines that will carry renewables-generated electricity from the desert areas of eastern California to its more populated service areas.
These projects have proven to be more of a cost than a benefit thus far, but ultimately promise to be a more cost-effective means of providing electricity in the long run. This sets the stage for years of reliable dividend growth that not all other power producers will be able to mirror down the road as the state's goals mature into state and federal mandates.
