Some dividend stocks have staying power. You can count on them to pay dividends quarter after quarter as well as deliver solid growth over the long term.
We asked three Motley Fool contributors to identify dividend stocks that you can hold forever. Here's why they picked AbbVie (ABBV -0.93%), Bristol Myers Squibb (BMY -0.65%), and Johnson & Johnson (JNJ -1.38%).
A proven dividend payer
David Jagielski (AbbVie): For a dividend-paying company to be a good investment to hold forever, it should have a solid track record for increasing dividends, strong fundamentals, and plenty of growth opportunities. AbbVie has all of those things.
The stock is a Dividend King with 50 consecutive years of dividend increases. It has boosted its payout significantly over the years, doubling the dividend in the past five years. And while the company may not always aggressively raise its dividend at such a high rate, it has shown that it is eager to reward investors through regular and generous increases.
In order to be able to continue raising its payouts, AbbVie needs strong financials and growth opportunities. Over the trailing 12 months, the company has averaged an impressive profit margin of 24%. Its free cash flow of $21.9 billion during that time is more than double what the company paid out in dividends ($9.9 billion), giving it a good cushion.
The company will suffer a blow next year as top-selling drug Humira loses U.S. exclusivity, but AbbVie has a pipeline that boasts dozens of programs. And sales for immunology drugs Skyrizi and Rinvoq soared 76% and 55% year over year, respectively, through the first three quarters of the year. The drugs should replace Humira's lost revenue in the long run. Overall, AbbVie's business still looks to be in solid shape.
If things get shaky, the company's strong free cash flow could enable AbbVie to pursue acquisitions to bolster its business. It has made big deals in the past, such as the acquisition of Botox maker Allergan for $63 billion in 2020.
AbbVie's stock currently trades at a forward price-to-earnings multiple of 14, which is cheaper than the S&P 500 average of 18. With a modest valuation, a great growing dividend, and promising growth potential, AbbVie is a dividend stock that I'd feel comfortable holding forever.
The patent cliff is not worrisome
Prosper Junior Bakiny (Bristol Myers Squibb): Bristol Myers' history dates back well over 100 years, and one of the keys to the company's success has been its ability to innovate. The drugmaker is still at it, racking up brand-new approvals to complement its already rich lineup of medicines.
Bristol Myers' portfolio of drugs that earned approvals in 2019 or later, generated $553 million in revenue in the third quarter, representing a 61% year-over-year increase. These products will continue rapidly growing their sales in the coming years, helping the company deal with several important patent cliffs.
Cancer drug Revlimid, one of the company's crown jewels, started facing generic competition this year. Further, blood thinner Eliquis and cancer medicine Opdivo, among Bristol Myers' best-selling medicines, will lose patent protection before the end of the decade.
But investors can rest assured: Bristol Myers' solid pipeline stands as one of its most important competitive advantages. It features several dozen ongoing clinical programs, a decent percentage of which should go on to win Bristol Myers' brand-new approvals or label expansions.
New approvals will translate to continued revenue and earnings growth, which should continue to drive solid stock market performance. Bristol Myers' stock performance has crushed the broader market over the past three decades. Its solid business is also why it can sustain its dividends. The company currently offers an attractive yield of 2.74%, a conservative cash payout ratio of 36.1%, and has raised its dividends by 54.3% in the past decade.
Bristol Myers' excellent dividend profile only enhances its solid business that can continue to thrive for much longer, regardless of changing economic conditions, geopolitical tensions, or whatever other challenges the market will face in the coming years. Investors can safely park this top dividend stock in their portfolios.
A well-known, solid company
Keith Speights (Johnson & Johnson): Blue chip stocks stand out as great picks to buy and hold forever. These companies are household names that are leaders in their industries. I think Johnson & Johnson ranks as one of the bluest blue chip stocks around.
The healthcare giant has been in business since 1886. It's kept on delivering for shareholders during good times and bad. Like AbbVie, J&J is a Dividend King. But the company's track record is even more impressive than its peer, with 60 consecutive years of dividend increases.
Unsurprisingly, J&J maintains an exceptionally strong financial position. The company generated revenpast 12 months. Its cash stockpile topped $34 billion as of the end of the third quarter.
J&J's growth should accelerate as the company recently announced that it plans to acquire fast-growing heart pump maker Abiomed for $16.6 billion. J&J is also spinning off its slower-growing consumer health unit next year.
Investors should be able to sleep well at night owning Johnson & Johnson. And they'll get paid (via solid dividends) for doing so.
