3 Dividend Stocks to Buy and Hold for the Next Decade

Some stocks are keepers. The best ones even pay you to hold them for years via generous dividends. Three Motley Fool contributors identified their picks for dividend stocks to buy and hold for the next decade. Here's why they chose AbbVie (ABBV 1.22%), Gilead Sciences (GILD 3.62%), and Johnson & Johnson (JNJ 0.06%). 

A temporary storm before the calm

Keith Speights (AbbVie): If you only looked at what AbbVie faces over the near term, you'd likely want to avoid the stock like the plague. Sales for the company's top-selling drug, Humira, are falling like a brick with new competition from biosimilars in the U.S. market.

However, I view the Humira headwinds as only a temporary storm before the calm for AbbVie. The drugmaker acknowledges that 2023 will be a challenging year. There's no way to sugarcoat losing exclusivity for a drug that generated nearly 37% of total sales last year. But the picture should begin to improve in 2024 with strong sales growth returning in 2025.

AbbVie already has two worthy successors to Humira on the market -- Rinvoq and Skyrizi. The company projects peak combined sales of more than $21 billion by 2027. That's greater than Humira made at its peak.

Other growth drivers for AbbVie include Botox, migraine drugs Qulipta and Ubrelvy, and antipsychotic Vraylar. In addition, the company's pipeline features several promising new programs, with cancer therapy epcoritamab and Parkinson's disease drug ABBV-951 especially standing out.

In the meantime, AbbVie's dividend program gives investors a lot to like. The company is a Dividend King with 51 consecutive years of dividend increases. Its dividend yield currently tops 3.6%.

Gushing with free cash flow 

David Jagielski (Gilead Sciences): If you're planning to hold a dividend stock for a decade, you should be confident in the business and its ability to grow and generate plenty of free cash. Having sufficient free cash can help sustain a dividend while also allowing a company to reinvest in its operations. 

Gilead Sciences is an excellent example of a business that fits the bill. In each of the past four years, the company has generated more than $7 billion in free cash flow. Its dividend, meanwhile, costs the business about $3.7 billion -- a little over half that tally. 

There's room for the company to not only fund its growth, but also raise its dividend, which Gilead has done. Its current quarterly payout of $0.75 is 32% higher than the $0.57 it was paying five years ago. That averages out to a compound annual growth rate of 5.6%. If Gilead were to continue increasing its dividend payments at that rate, it would take approximately 13 years for the dividend to double.

Thus, there's a big incentive for holding the dividend stock for the long term as its already high dividend yield of 3.6% could generate even more recurring income for your portfolio in the future.

While a lot can change during that time, Gilead's HIV business gives it some valuable stability, as patients need to take HIV treatments on an ongoing basis. And Gilead recently obtained approval for a long-acting HIV treatment, Sunlenca, which only needs to be taken twice a year. It's only available for people who cannot take other HIV treatments (e.g., they are resistant to other drugs) but it can be a game changer for those patients who are eligible.

Meanwhile, Gilead is growing oncology business can also set the company up for even more growth down the road. As a case in point, sales from cancer drug Trodelvy rose 79% last year to $680 million.

Gilead's business has a lot of growth potential. With its strong financials and billions in free cash flow, this stock is an income-generating investment you'll want to hang on to for the next decade.

Looking beyond legal troubles 

Prosper Junior Bakiny (Johnson & Johnson): There are many things for which Johnson & Johnson is known. Customers are familiar with the popular brands it offers through its consumer health division (Tylenol, Listerine, Aveeno, etc.), which it is currently spinning off. Some admire Johnson & Johnson's long history of medical innovation and solid financial results.

Others are attracted to the drugmaker's run of 60 consecutive years of dividend increases, which makes the company a Dividend King. However, over the years, Johnson & Johnson's image has been tarnished by a litany of lawsuits, especially those surrounding its talcum products that allegedly caused cancer, or so the tens of thousands of plaintiffs claim.

The increased legal burden Johnson & Johnson has faced is perhaps its biggest risk, with the potential to significantly harm the company's finances in the next decade and beyond. Fortunately, it looks increasingly likely that the healthcare giant will be just fine and should continue delivering solid results and dividend hikes for a while.

Johnson & Johnson recently offered $8.9 billion to settle all current and future talc-related lawsuits with no admission of guilt, a settlement that would be favorable in the grand scheme of things and is being backed by many of the concerned parties. 

Elsewhere, the company's business remains strong, with the split from its consumer division underway, which will lead to stronger revenue growth. J&J still has plenty of blockbuster products in its pharmaceutical portfolio. It also has a medtech segment that's an important player in cardiovascular health, robotic-assisted surgery, and more areas.

The company should be more than capable of generating consistent profits, just as in the past. Johnson & Johnson's dividend yield of 2.75% is higher than the S&P 500's average of 1.74%, and its dividend track record speaks for itself. That's why it's still worth it for income-seeking investors to stick with Johnson & Johnson through the next 10 years or more despite its legal issues.