3 No-Brainer Dividend Stocks to Buy in 2023

Too many choices can lead to analysis paralysis. Consider that there are over 4,300 dividend stocks that trade on the major U.S. stock exchanges. It would be nice to whittle the list down to a handful.

With this in mind, we asked three Motley Fool contributors to pick no-brainer dividend stocks to buy in 2023. Here's why they chose AbbVie (ABBV 0.25%), Johnson & Johnson (JNJ 0.67%), and Eli Lilly (LLY -0.64%).

Play the long game

Keith Speights (AbbVie): It's practically impossible to predict which dividend stocks will perform the best in 2023. Thankfully, we don't have to. If you play the long game, you only need to select dividend stocks that are likely to deliver solid total returns over the next decade and beyond. I think AbbVie makes the cut with this mindset.

The drugmaker offers an attractive dividend yield of nearly 3.7%. AbbVie also belongs to the exclusive group known as Dividend Kings -- stocks that have increased their dividends for at least 50 consecutive years.

In 2022, AbbVie trounced the market with a gain of 19.4%. Importantly, the stock was able to do this even though AbbVie's sales are about to decline with the loss of U.S. exclusivity for its top-selling drug, Humira.

Were investors like ostriches sticking their heads in the sand? Not at all. They were fully aware of Humira's impending challenges. However, they also knew that AbbVie has been preparing for this event for a long time.

There's no way to avoid a drop in revenue in 2023. But AbbVie should be able to quickly return to growth that extends for years to come. Its newer drugs, including Humira's successors Rinvoq and Skyrizi, along with a promising pipeline, will help the company more than offset the declining sales from Humira.

I don't know if AbbVie will be able to reward investors this year as much as it did in 2022. However, if you have a long-term horizon, that shouldn't matter.

Attractive yield and tons of stability 

David Jagielski (Johnson & Johnson): If you want a no-brainer dividend in healthcare, Johnson & Johnson is a stock that should be near or at the top of your list. Despite inflation, economic challenges, and even legal troubles, the company has had no problem with generating strong profits over the years and increasing its dividend.

J&J's dividend yield of nearly 2.6% is a lot better than the S&P 500 average of 1.8%. The company's dividend is likely to grow steadily in the future if history is any guide. J&J has increased its dividend for 60 straight years. Over the past 10 years, the company has increased its dividend payments by 85%, averaging a compounded annual growth rate (CAGR) of 6.4% during that time.

In the trailing 12 months, Johnson & Johnson generated $17.7 billion in free cash flow -- 54% more than the $11.5 billion it paid out in cash dividends during that time. The company is only paying out 61% of its earnings as dividends, so there's plenty of room for its dividend to grow.

J&J's business will soon look a bit different with its plans to spin off its consumer health business this year. That could end up being a great move as it will allow the company to focus on pharmaceuticals and medical devices, segments that are larger and have more growth potential. 

You can definitely find higher dividend yields than what Johnson & Johnson offers. However, J&J is a dividend stock that you can buy that won't put your portfolio at risk in what could be a volatile year in 2023.

The cherry on top

Prosper Junior Bakiny (Eli Lilly): Like most investors, those who seek dividends want companies with solid businesses since they are more likely to raise their payouts and less likely to cut or suspend them during economic downturns. That's precisely what makes Eli Lilly such an excellent dividend stock. Consider that the drugmaker has doubled its payouts in the past five years amid a pandemic, geopolitical tensions, and economic troubles that reached peaks unseen in decades. 

Lilly won't stop raising its dividends anytime soon thanks to its product portfolio -- led by diabetes medicine Trulicity -- that will continue generating solid and consistent revenue and earnings. There are also newer therapies that will help catapult its results to new heights. Last year, the company earned approval for Mounjaro, a diabetes medicine that could become one of the best-selling drugs in the world once it reaches its peak.

Eli Lilly expects up to four new approvals by the end of 2023. The drugmaker could succeed where many others have failed with donanemab, a potential therapy for Alzheimer's disease. If approved, donanemab will almost certainly join Lilly's list of medicines that generate at least $1 billion annually.

There are many more exciting candidates in Eli Lilly's pipeline. Lilly has been a leader and an innovator for decades, especially in diabetes and obesity care. This has allowed it to produce steady financial results. 

Lilly delivered a market-beating return for shareholders last year. Its dividend provided the cherry on top. Granted, the company's dividend yield of 1.24% is relatively low. However, Lilly has an impressive recent streak of dividend increases. It also has a reasonable payout ratio that should allow it to continue raising its dividend.