Whether 2022 goes out like a lion or a lamb, it's been quite a ride. There have been few dull moments, from wars to record inflation to bear markets. Unfortunately, excitement isn't always kind to investments. This is especially true for growth, tech, and consumer discretionary stocks, which are incredibly popular among individual investors.
Many investors are looking again at dividend growth as a tool to grow wealth after the recent growth stock bubble and crash. AbbVie (ABBV 1.25%) and Vici Properties (VICI +0.45%) have yields over 3%, excellent dividend growth histories, and have dominated the market this year, as shown below.
ABBV Total Return Level data by YCharts
Let's take a look at why.
AbbVie's yield outpaces rivals
Pharmaceutical giant AbbVie is best known for its blockbuster Humira franchise, one of the best-selling prescription drugs ever. Statista reports that it was the top-selling drug again in the U.S. in 2021, with $17.3 billion in domestic sales along with $3.4 billion internationally. But reliance upon one drug is dangerous for a company, especially as patents expire or biosimilars hit the market.
Biosimilars for Humira will be available in the U.S. for the first time in 2023. Luckily, management has been preparing for this for a long time. Humira sales represented 61% of AbbVie's revenue in 2018, but it fell to 37% in 2021 even as total sales rose from $33 billion to $56 billion.
Much of this comes from the Allergan acquisition in 2020, which brought Botox Cosmetic, Juvederm, Botox Therapeutical, Vraylar, and a host of other products. Sales have skyrocketed since AbbVie took ownership, and AbbVie has developed two new likely blockbusters: Skyrizi and Rinvoq. Management expects $15 billion in annual sales from these two by 2025.
Concern over Humira has kept the stock price lower and the dividend yield higher than it should be, creating an excellent opportunity for investors. AbbVie yields more than many competitors, as shown below.
ABBV Dividend Yield data by YCharts
The company has increased its dividend every year since its inception in 2013 from $1.60 to $5.92 per share annually. Shareholders should continue to benefit from AbbVie's growing drug portfolio. Wall Street is waking up to AbbVie's ability to thrive post-Humira, but investors can still snag a compelling yield while it lasts.
Vici is not your average REIT
Many real estate investment trusts (REITs) have suffered heavy losses in 2022 due to rising interest rates, but not Vici. In fact, Vici's share price, even without the dynamite yield, is thriving.
NYSE: VICI
Key Data Points
The Vanguard Real Estate ETF is down 25% this year, so why has Vici escaped this fate? Vici owns one of the world's largest portfolios (44 properties in 15 states) of one-of-a-kind gaming and entertainment properties, such as Caesars Palace, The Venetian, The Palazzo in Las Vegas, and Empire City in New York. These can hardly be replicated, unlike office buildings or warehouses, and that gives Vici an advantage.
Some might think that entertainment properties are risky, with a recession likely in 2023, but that is why it's better to hold the landlord than the casino companies themselves. Vici raised the dividend and collected all the rent even during the worst pandemic closures in 2020.
Indeed the company reports 100% rent collection and a dividend that has grown each year since its debut in 2017. Since then, the dividend has grown from $0.16 to $0.39 per share quarterly, including an 8.3% raise this year, as shown below.
VICI Dividend data by YCharts
In 2022, the company also:
- Joined the S&P 500.
- Completed acquisition of MGM Growth Properties.
- Reported 96% of leases (and 47% with no caps) contain automatic rent escalators linked to the Consumer Price Index.
Investors can snag a yield of over 4.5% with Vici stock right now. This will likely continue to reward investors, given the company's growing portfolio and pristine rent collection history.
Investing in dividend stocks doesn't mean you have to abandon growth or tech stocks altogether; many (like me!) believe this is a fantastic time to invest long-term in some of the world's finest tech stocks while they are down. But a well-rounded portfolio should also have consistent income and growing dividends. AbbVie and Vici are attractive stocks to start with.
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