Reluctant to jump back into buying stocks right now? That's understandable. While the stock market rebounded somewhat last week, there's still a lot of uncertainty about what's around the corner. However, many stocks are available at attractive valuations. And lower share prices have pushed dividend yields higher in many cases.
We asked three Motley Fool contributors to identify dividend stocks that they'd buy right now without any hesitation. Here's why they chose AbbVie (ABBV -1.03%), Amgen (AMGN -0.19%), and Pfizer (PFE -0.19%).
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A continuing reign
Keith Speights (AbbVie): AbbVie has been a Dividend Aristocrat for years. It's now also a Dividend King with the company increasing its dividend for the 50th consecutive year. Some members of dividend royalty don't offer especially attractive dividend yields. Not AbbVie -- its dividend yield tops 3.5%.
I have no doubt whatsoever that AbbVie will continue its reign as an elite dividend stock. The company remains highly profitable and generates strong cash flow.
But what about the looming loss of U.S. exclusivity for AbbVie's top-selling drug Humira? That doesn't worry me at all. Sure, the company will experience a decline in revenue at first. However, sales for Humira won't evaporate overnight. The drug should still be a megablockbuster for a long time to come.
More importantly, AbbVie has other products in its lineup that should take up the slack. In particular, the company projects that autoimmune-disease drugs Rinvoq and Skyrizi will rake in at least $15 billion in combined sales in 2025.
Most stocks have been pulled down with the overall stock market sinking. AbbVie, though, has delivered a 17% year-to-date gain. My view is that the big pharma stock will keep up its winning ways over the long term.
Rest easy with this biotech giant
Prosper Junior Bakiny (Amgen): The COVID-19 pandemic, geopolitical tensions, inflation. These are just some of the problems facing the world right now. The uncertainty of it all has affected the stock market. Finding stable companies with robust businesses and steady dividends is practically a luxury in this environment. But that's precisely what Amgen offers.
This drugmaker has been around since the early 1980s, which means it has lived through many crises. Since the beginning of the year, Amgen's stock price has increased by 4%, compared with an 8.3% drop for the S&P 500. While the company has been dealing with patent cliffs of late, there's reason to be excited about what's to come.
A couple of new approvals have helped replenish Amgen's lineup of drugs. In December, the company earned the regulatory nod from the U.S. Food and Drug Administration for Tezspire under the Priority Review program. Amgen developed this medicine in collaboration with AstraZeneca. The Priority Review designation is reserved for those medicines that would be more effective than existing therapies if approved.
According to Amgen, Tezspire "is the first and only biologic to consistently and significantly reduce asthma exacerbations across Phase 2 and 3 clinical trials." There are plenty of competing options for asthma. However, the evidence strongly suggests that Tezspire is on its way to becoming one of the major players within this therapeutic area. Look for it to contribute substantially to Amgen's revenue in the coming quarters.
Other relatively new approvals for Amgen include osteoporosis treatment Evenity -- which earned the nod in 2019 -- and cancer medicine Lumakras, which was approved in the U.S. last year and has since earned the green light in other countries. These medicines will continue to grow their revenue for a long time before the company has to worry about losing patent protection. And they will help deal with Amgen's drugs whose sales are currently dropping.
Backed by its strong business, investors can be confident that Amgen's dividend payouts are safe. The company currently offers an above-average yield of 3.09% and a conservative cash payout ratio of 47.9%. In short, Amgen is a top dividend stock to consider adding to your portfolio today.
Plenty of cash for dividends and growth
David Jagielski (Pfizer): The one reason I sometimes hesitate to buy dividend stocks is that I know there's often limited growth potential there. If you buy a utility stock or a bank stock, you're looking at modest long-term gains in most cases. But Pfizer is one of the more exceptional dividend stocks on the market. It pays a yield of 3.2%, which is more than double the S&P 500 average of 1.3%. Its business is also booming.
This year is going to be a huge one for Pfizer, with the company potentially reporting more than $100 billion in revenue. More than half of that will come from its COVID-19 vaccine and pill. The windfall of cash that the company makes from COVID-19 could help pave the way for some incredible growth down the road. There's nothing like a boatload of cash to not just help pay dividends but also make acquisitions that drive growth.
In 2021 alone, Pfizer announced three acquisitions, including Amplyx Pharmaceuticals, Trillium Therapeutics, and Arena Pharmaceuticals. All those deals can help the company quickly expand its capabilities and strengthen its pipeline, leading to future growth.
Building up a strong cash balance can help facilitate more deals in the future. As of the end of 2021, Pfizer had more than $31 billion in cash and short-term investments on its books. That, along with its positive cash flow, can help the business balance both growth opportunities and a strong payout.
Last year, Pfizer spent $8.7 billion on its dividend. That's less than one-third of the nearly $30 billion in free cash it generated in 2021. Its dividend is incredibly safe. The company increased its payouts regularly since 2010.
The main reason I wouldn't hesitate to buy Pfizer is because of the strength of the business today. Its COVID-19 revenue may not be as significant in a few years as it is right now, but the company is taking advantage of the strong profits and cash flow it is generating from that to make its business better in the long run.
By not spending all of its extra cash on a huge dividend hike, the company can provide investors with recurring income while still focusing on long-term growth. That's why Pfizer is a stock that's easy to justify investing in right now as it ticks off boxes for both income and growth-oriented investors.
