Most of us spend a lot of mental energy on trying to avoid bumbling into fresh regrets, especially when it comes to our investments. While there's no ironclad method for picking perfectly safe stocks, thankfully there are a few dividend-paying companies that are a bit less risky than average -- as a result of their history of effective competition and their management's skill at executing their business models.
Both of the stocks I'll review in a moment are likely to keep growing and paying their shareholders for a very long time, and that means you aren't likely to regret making a purchase. So let's dive in.
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1. AbbVie
When it comes to appealing biopharma dividend stocks that investors can depend on, AbbVie (ABBV -0.30%) is near the top of the list. Thanks to its gargantuan pipeline of more than 80 immunology, oncology, neuroscience, and aesthetics programs, not to mention its dozens of drugs on the market, it has more than enough avenues of growth to keep shareholders happy for years to come. And with its dividend, which presently has a forward yield of 3.8%, holding on to its shares is typically a pleasant ride.
For 2022, AbbVie's net income was over $11.8 billion, and it only paid out around $10 billion in dividends. It's true that its payout ratio is on the high side, at 85%, but there's little chance its dividend will need to get cut anytime soon. The company expects its top-line growth to slow in 2023 and 2024 as a result of eroding market share of its psoriatic arthritis drug Humira because of newly commercialized generic versions from competitors.
But by 2025, management is anticipating annual sales to return to a compound annual growth rate between 7% and 9%. To accomplish that, AbbVie will be ramping up sales of its latest immunology medicines, Rinvoq and Skyrizi, and it'll also be realizing more revenue from its aesthetics portfolio.
In the long term, AbbVie's pipeline will continue to drive growth, and it's planning to start 110 new studies in 2023 alone. Next year, regulators could approve as many as seven new indications for its existing medicines, enabling it to squeeze even more money out of its initial research and development work required for commercialization.
The most important potential regret that AbbVie investors might have stems from its drug pricing practices. Per the newly passed Inflation Reduction Act (IRA), it'll need to pay a fine to Medicare for hiking the price of Humira faster than the pace of inflation. It's unclear how much that fine will be, or whether there will be more legislation seeking to control prices. But if there is, it could cause a few (likely temporary) regrets for shareholders.
2. NextEra Energy
NextEra Energy (NEE 0.51%) is a relatively safe dividend stock because it's one of the world's largest producers of something almost everyone wants more of: renewable energy. With the company inking deals to build and operate more than 8,000 megawatts of capacity via renewables in 2022 alone, and with government subsidies in the IRA slated to slash some of its operating costs for wind and solar sources, this company's future is quite bright. That's not to imply that its past was anything other than great for shareholders, though; in the last five years, the total return of its shares topped 106%.
Its dividend yield near 2.4% won't make shareholders wealthy overnight. But when paired with management's plan to hike the dividend by 10% per year through at least 2024, holding on to its shares for a decade or more will likely result in a massively increased income stream for those who are patient.
And it isn't as though there's much danger of the payout getting cut, either. It paid $3.3 billion in dividends in 2022 from its net income of $4.1 billion, and management is banking on its earnings continuing to grow. Given that it's anticipating building up to 42 gigawatts of new renewable energy and energy storage resources in the next three years alone, it's hard to disagree.
The biggest risk with owning NextEra stock is that the political environment could shift against it and eschew the green transition. That's quite unlikely to happen, but it could still make for a huge regret if it does. On the other hand, new legislation could also easily be a potential tailwind of epic proportions, like the IRA is shaping up to be -- the company estimates it will significantly lower its overall tax burden over the next 15 years.
So don't be too scared of the worst-case scenario as this stock is ready to buy today.
