According to a recent Ipsos poll, one in five Americans don't expect to retire, and that's largely because they don't feel they can afford to do so. One way for Americans to improve their financial situation in the future, and to potentially change that outlook, is by investing in dividend stocks. Income-generating investments can provide you with recurring income to bolster your finances, lessening the need for you to rely on Social Security.
Three companies that make for excellent dividend stocks to buy and hold for decades include AbbVie (ABBV +1.20%), BCE (BCE -0.29%), and Coca-Cola (KO +0.66%). Let's see why.
1. AbbVie
Drugmaker AbbVie provides investors with an above-average dividend yield of 3.9%, which is more than double the S&P 500 average of 1.5%. The company has an impressive track record for not just paying but increasing its payouts. Going back to when it was part of Abbott Laboratories (it spun off in 2013), AbbVie is a Dividend King.
NYSE: ABBV
Key Data Points
As long as the company delivers strong results, the business should not only continue to make dividend payments, but raise its payouts as well. In its most recent quarterly earnings report, for the period ended June 30, the company reported adjusted diluted earnings per share (EPS) of $2.91, which is higher than the $1.48 that it pays out in dividends each quarter.
Although sales of $13.9 billion were down 5% from the prior-year period, that's with the company's top-selling drug Humira seeing its sales fall 25% as it faces increasing competition from generics. With a strong showing from its other immunology drugs -- Skyrizi and Rinvoq, which generated year-over-year growth of over 50% and which are poised to make up for the loss of Humira's sales -- AbbVie is well-positioned for more growth ahead.
Despite the challenges with Humira's declining sales, AbbVie has a diversified business, and that makes it an ideal stock to buy and hold for not just years but decades. Plus, with a forward price-to-earnings (P/E) ratio of only 14, it's an arguably cheap investment with a good margin of safety, as the average stock on the S&P 500 trades at a multiple of 21.
2. BCE
Another good buy-and-hold income stock is BCE. The telecom company is one of the largest in Canada, and with limited competition, it's likely to continue dominating the industry there. While it's the only stock on this list that isn't a Dividend King, it has still been making generous rate hikes along the way.
NYSE: BCE
Key Data Points
Earlier this year, in February, BCE raised its dividend by 5.2%, marking the 15th consecutive year that it has done so. At the time, it also announced that it hit a record number of retail internet net activations in 2022, with a growth rate of 33%. BCE expects to achieve revenue growth of up to 5% for 2023 and free cash flow to increase by as much as 10% as it plans to decrease capital expenditures.
The stock pays an impressive 6.8% yield, easily the highest on this list. And with a forward P/E multiple of 18, the shares are modestly priced and worth hanging on to for the long haul.
3. Coca-Cola
Soft drink giant Coca-Cola also raised its dividend payments in February -- the 61st straight year it has done so. The 4.6% rate increase was a two-cent bump up in the dividend, putting it at $0.46 per quarter. With the increase, the stock is yielding 2.9%. It's the lowest yield on this list, but it's arguably the most stable one given Coca-Cola's strong financials and solid industry position.
NYSE: KO
Key Data Points
Last week, the company released its second-quarter earnings. Coca-Cola achieved net revenue growth of 6% year over year as the top line hit $12 billion for the period ended June 30. Encouraged by the results, management raised its guidance for the year as the business is thriving even as it increases prices to battle inflation.
This year, it projects organic revenue growth between 8% and 9%. That's up from an earlier forecast that called for between 7% and 8% growth. EPS last quarter was also up an impressive 34% to $0.59.
The only downside to Coca-Cola's stock right now is that it isn't terribly cheap, trading at a forward P/E of 24. But for investors who want a good dividend stock to hold for years, this certainly ticks off a lot of boxes for stability, yield, and long-term dividend growth. The business remains in excellent shape, and that can make this a solid option for income investors to add to their portfolios today.
