3 Great Dividend Stocks to Buy in September

Sure, the stock market remains volatile. But dividend stocks often provide more stability than most other stocks. They also pay you to wait for the market choppiness to end.

We asked three Motley Fool contributors to pick dividend stocks to buy in September. Here's why they chose AbbVie (ABBV -1.03%), Gilead Sciences (GILD 0.07%), and Johnson & Johnson (JNJ -0.69%).

A dividend stock for all seasons 

Prosper Junior Bakiny (AbbVie): Pharma giant AbbVie boasts practically all the characteristics of an outstanding dividend stock, including a stable business with increasing revenue and earnings, solid growth avenues, a juicy yield, a conservative payout ratio, and of course, an impressive history of dividend hikes. Let's unpack that further, starting with AbbVie's lineup of drugs.

Although the company's crown jewel, immunology medicine Humira, faces biosimilar competition next year, AbbVie has earned many more approvals and acquired other products to prepare for these challengers. The company's lineup features immunosuppressants Skyrizi and Rinvoq, its Botox franchise, and several other exciting products whose sales are northbound. 

AbbVie's solid pipeline ensures it will expand its revenue base and continue delivering strong financial results long after Humira's days are over. The company currently boasts several dozen ongoing clinical trials. What about AbbVie's dividend yield? It currently stands at an impressive 4.16%. By comparison, the average dividend yield of the S&P 500 is 1.69%. AbbVie also sports a cash payout ratio of 43.5% -- well below the 60% limit where it starts to be considered too high.

Lastly, AbbVie is a Dividend King, having raised its payouts for 50 consecutive years. The company's dividends have grown by 31.8% in the past three years alone, amid the pandemic and the economic trouble the world encountered. Investors can rest assured that AbbVie will maintain and even increase its payouts during challenging times, thanks to the solid business that supports it. That's why the drugmaker is an excellent dividend stock to buy in September and beyond. 

A high yield plus solid financials and growth prospects

David Jagielski (Gilead Sciences): Gilead Sciences develops medicines focused on treating HIV. Its oncology business has also been growing. The stock gives investors a little bit of everything, meaning that you don't have to compromise safety or promising growth potential in exchange for a high yield; Gilead has it all.

At 4.7%, its yield is three times what the average stock on the S&P 500 pays. That's a significant difference; on a $30,000 investment, you'd be collecting nearly $1,000 more in dividends from Gilead (over the course of a year) than the S&P would pay. Plus, Gilead has been increasing its dividend payments over the years. While it may not have a long track record of doing so, its quarterly dividend has grown 70% since 2015, when Gilead initiated its dividend program.

While its payout ratio may seem high at 88%, the company's in a strong enough position to continue making dividend payments. Gilead has generated $9.4 billion in free cash flow over the past four quarters, which is more than twice what it paid in dividends during that time -- $3.7 billion. Its operating margin has also been a solid $7.3 billion over the trailing 12 months, which is 27% of the $27.5 billion in revenue it reported over that time frame. The big biotech also raised its full-year revenue and earnings outlook in August, causing its stock to jump.

As good as Gilead's business looks today, it has the potential to get even better. One of the exciting treatments it has in its pipeline is lenacapavir, which could be a game changer in HIV. If approved, patients could ditch daily pills and just receive lenacapavir (via injection) twice a year. The U.S. Food and Drug Administration (FDA) has received the company's New Drug Application for lenacapavir and should make a decision on it before the end of the year.

Overall, Gilead is a solid all-around stock to buy whether you want dividends or growth potential.

A healthcare giant that's about to become more nimble

Keith Speights (Johnson & Johnson): Like AbbVie, Johnson & Johnson is a Dividend King. However, J&J has an even more impressive streak of dividend hikes at 60 consecutive years compared to 50 years in a row for AbbVie. Its dividend yield currently tops 2.7%.

Johnson & Johnson has long been viewed as a relatively safe pick for investors. It's lived up to that reputation so far in 2022. Although the stock is down a little year to date, J&J is still easily beating the S&P 500.

A cursory glance at J&J's second-quarter results probably won't cause any excitement. The company's sales increased by only 3% year over year. Its adjusted earnings per share grew by just 4.4%. But there's a big change on the way that should help make this healthcare giant much more nimble.

Johnson & Johnson plans to spin off its consumer health unit in 2023. That will leave the company with its fastest-growing business -- pharmaceuticals -- along with its medtech segment. Look for J&J's growth trajectory to pick up significantly after the transaction closes.

Some might worry about Medicare drug pricing changes that will be effective in 2026. Medicare will be able to directly negotiate with pharmaceutical companies on the costliest drugs for the federal program. However, J&J should be able to navigate this change and continue to grow its revenue.

The company's current blockbusters, including Darzalex and Tremfya, and its strong pipeline featuring 39 programs in late-stage development should help ensure that Johnson & Johnson keeps its dividends flowing and growing for years to come. J&J remains a relatively safe dividend stock to buy.