It's hard to watch the value of your portfolio decline in a bear market. The pain is so acute right now that dividend-paying stocks tied to businesses with reliable cash flows have a hard time finding buyers at sensible prices.
Times like these are when the world's most successful investors do the most shopping. The market may have found a bottom already, or we could be in for a lot more pain.
Luckily, we have good reasons to expect many more years of strong cash flows from these dividend-paying businesses. Here's how they can boost your returns if you just give them some time.
1. Digital Realty Trust
Investors seeking reliable dividends want to get their hands on some shares of Digital Realty Trust (DLR -0.77%). This is a real estate investment trust (REIT) that owns heaps of data centers, which are essentially rooms full of powerful computers and air conditioning units to keep them from overheating.
REITs are a great option for investors who want to generate a lot of passive income because they legally avoid taxation as long as they distribute nearly all of their profits to investors as dividends.
Digital Realty is a particularly good REIT to buy now since businesses all over the world are in the middle of an unstoppable shift away from in-house infrastructure and toward services that reside in the cloud. This is why analysts at Allied Market Research predict the data center industry will almost triple from $187 billion in 2020 to $517 billion in 2030.
In the first quarter of 2022 alone, Digital Realty Trust signed new leases on a little over 1 million square feet of property at rates that would make landlords in Manhattan blush. Annual rental rates on the new leases work out to around $155 per square foot.
At recent prices, shares of Digital Realty Trust offer a 3.8% yield, and investors can look forward to a rising payout. Reliable cash flows from lessees locked into long-term contracts allowed the company to raise its dividend payout 67% over the past 10 years.
We already know that this REIT has the means to raise its payout further. Funds from operations came in at $6.47 per share over the past year -- more than enough to meet an annual dividend obligation that is currently set at $4.88 per share.
2. AbbVie
AbbVie (ABBV -2.04%) offers a healthy dividend yield of 3.7% right now, slightly less than Digital Realty Trust -- but probably not for very long.
This biopharmaceutical company has increased its dividend by more than 250% since spinning off from Abbott Laboratories in 2013. The reason for the split was concern about the impending loss of market exclusivity for Humira, a blockbuster injection for treating arthritis and psoriasis that racked up more than $20 billion in sales last year.
Next year, Humira sales will begin to tank as a slew of biosimilars that have already been approved by the FDA enter the U.S. market. This is a great stock to buy now because the investments AbbVie has made with Humira could allow it to continue raising its dividend at a hair-raising pace for another decade.
In 2020, AbbVie acquired Allergan and its Botox franchise for about $63 billion. There are already other companies marketing drugs very similar to Botox, but none of them have AbbVie's enormous resources to develop and market them. Without significant competition anywhere in sight, the $4.7 billion in sales Botox racked up last year will probably keep climbing for at least another decade.
While Botox climbs steadily, a pair of drugs AbbVie launched in 2019 could offset Humira losses on their own. Rinvoq, a treatment for arthritis, is already on pace to exceed $2 billion in sales this year. Sales of Skyrizi, a psoriasis treatment, are climbing even faster.
AbbVie finished the first quarter on pace to reach $4 billion in sales this year. With a proven ability to reinvest profits from one blockbuster drug into the development of new ones, dividend investors can look forward to heaps of passive income from this stock.
