Dividend stocks aren't just for investors looking for a reliable passive income stream. Companies that have a habit of rewarding their shareholders with increasing payouts often have solid businesses that generate growing revenue and profits. That's probably one reason why dividend stocks have historically outperformed their non-dividend-paying counterparts.
And in the universe of dividend companies, the so-called Dividend Kings -- companies that have raised their payouts for at least 50 consecutive years -- reign supreme. Let's look at two Dividend Kings worth buying now and holding onto forever: Johnson & Johnson (JNJ -0.33%) and Abbott Laboratories (ABT 0.62%).
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1. Johnson & Johnson
Johnson & Johnson has been a leader in the pharmaceutical industry for several decades. The company markets drugs in different therapeutic areas, including oncology, immunology, neuroscience, and infectious diseases. J&J's largest therapeutic areas by revenue are oncology and immunology. These two fields are also the biggest and the fastest-growing in the pharmaceutical industry.
Spending on oncology medicines is expected to expand at a compound annual growth rate (CAGR) of 9% through 2025; immunology is expected to record a 12% CAGR in the same period. No other drug category is forecast to rise at a CAGR of more than 5%. Johnson & Johnson has established leadership in these two fast-growing areas in the past thanks to cancer drugs such as Darzalex and Imbruvica, and immunosuppressants such as Stelara and Tremfya. Three of these medicines are still growing their sales.
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In the first quarter, Stelara's revenue increased by 6.5% year over year to $2.3 billion, while Tremfya's sales jumped by 41.3% to $590 million. Meanwhile, Darzalex's sales increased by 36% to $1.9 billion; however, Imbruvica's revenue came in at roughly $1 billion, 7.7% lower than the year-ago period as a result of heightened competition. For the period, Johnson & Johnson's total sales grew by 5% year over year to $23.4 billion.
The good news is that Johnson & Johnson has a rich pipeline. And of the company's 94 ongoing clinical trials, 58 are either in oncology or immunology. Beyond its pharmaceutical segment, Johnson & Johnson's medical devices unit also seems to have a bright future, thanks in part to its robotic-assisted surgery (RAS) product, Ottava. The RAS market remains severely underpenetrated. Only 3% of surgeries worldwide are performed using robot assistance.
Although there are strong competitors in this market, Johnson & Johnson could profit from its growth in the coming years. It is worth noting that J&J is shedding its consumer health business, which is home to famous over-the-counter brands such as Neutrogena, Tylenol, Benadryl, and more. The company will complete this transaction by the end of the year.
The move should help Johnson & Johnson's top-line growth rate increase (consumer health is the least impressive of its segments in this regard) and decrease exposure to lawsuits related to products in this unit. J&J's business will remain solid, and with 59 consecutive years of dividend increases under its belt, we can be sure that this healthcare giant will continue rewarding its shareholders for many years to come.
2. Abbott Laboratories
Abbott Laboratories is a medical devices specialist with dozens of products. It is also a veteran of the healthcare industry, having proven over the past few decades that it has what it takes to navigate the regulatory hoops required to be successful in this sector. Although Abbott is best-known for its medical devices business, it operates three other segments: Diagnostics, established pharmaceuticals, and nutrition.
Abbott was able to keep its revenue and earnings afloat amid the worst of the COVID-19 pandemic and as its medical devices unit was struggling. The company successfully developed and marketed several coronavirus diagnostic tests. That's one of the benefits of having a diversified business. Financial results continue to be good for Abbott Laboratories. In the first quarter, the company's sales jumped by 13.8% year over year to $11.9 billion.
Meanwhile, Abbott's adjusted earnings per share jumped by 31.1% year over year to $1.73.
One major area of growth for the company is diabetes care -- thanks to its continuous glucose monitoring (CGM) system, the FreeStyle Libre. CGM devices allow diabetes patients to keep track of their blood glucose levels continuously throughout the day. The adoption of this technology continues to propel sales of the FreeStyle Libre higher. In the first quarter, Abbott's revenue from this device came in at about $1 billion, 20.4% higher than the year-ago period.
The FreeStyle Libre has gained about one million new users in the past year and currently boasts roughly four million users worldwide. With a rising population of diabetes patients, the need for innovative devices like the FreeStyle Libre will only rise in the coming years. Abbott does have other growth avenues, too, including its MitraClip, a leading device for the treatment of mitral regurgitation.
Abbott Laboratories is new to the club of Dividend Kings; it has raised its dividends for 50 consecutive years. The company is well-positioned to continue growing its revenue, profits, and payouts for many years to come.
