The elite club of Dividend Kings arguably stands out as the market's most prestigious group of dividend payers. Companies must have raised their payouts for at least 50 consecutive years to join, a feat requiring an incredibly solid business. The strength of their underlying operations makes many Dividend Kings attractive beyond the consistent passive income they offer, even when they aren't performing particularly well.
Let's look at two Dividend Kings that are lagging the market this year but are still worth investing in for the long term: Abbott Laboratories (ABT 0.63%) and AbbVie (ABBV -4.58%).
1. Abbott Laboratories
Medical devices expert Abbott Laboratories has delivered somewhat inconsistent financial results over the past three years. The pandemic initially harmed the company's business, and although it was able to keep its earnings afloat by marketing coronavirus diagnostic tests, sales of these products have been up and down. In the second quarter, Abbott's revenue declined by 11.4% to almost $10 billion.
The past few years aside, though, Abbott Laboratories has been delivering excellent results for a long time.
ABT Revenue (Quarterly) data by YCharts
The company owes it to an internal culture dedicated to innovation, its expertise in navigating the highly regulated healthcare industry, and a brand name that inspires confidence in the physicians and patients who use its products. These assets should continue to serve Abbott Labs well, as the company still has plenty of growth opportunities.
Perhaps the most important lies in diabetes care, where Abbott markets a leading continuous glucose monitoring (CGM) system franchise, the FreeStyle Libre. CGM devices help improve health outcomes for diabetes patients by allowing them to track their blood glucose levels throughout the day.
Abbott's diabetes care business has arguably been the single most consistent segment (and the most significant growth driver) in recent years, thanks to its FreeStyle Libre and the growing adoption of CGM. But the company's portfolio features many more products, from the MitraClip, which helps treat mitral regurgitation (a heart condition), to the newly approved leadless pacemaker (to help treat a slow heartbeat), the Aveir.
That's just the tip of the iceberg when looking at Abbott's vast portfolio of devices. Further, although Abbott's medical devices unit is the most promising, it has a diversified business that includes three other segments: nutrition, diagnostics, and established pharmaceuticals. The company's top line should bounce back once the effects of its coronavirus diagnostics business fade.
And in the long run, Abbott will most likely remain an innovator capable of growing its revenue and earnings at a good clip. Abbott Laboratories is currently on its 51st consecutive year of payout increases -- that's what makes it a Dividend King. The stock's yield of 2.03% isn't that high, but still beats the average of 1.54% for the S&P 500. And the dividend looks as secure as the rest of its business.
2. AbbVie
AbbVie used to be under the umbrella of Abbott Laboratories; it split into a stand-alone company in 2013. But because of its years spent as a division of the medical devices giant, AbbVie is also considered a Dividend King. So, officially, it has also raised its payouts for 51 consecutive years. In the 10 years since it separated from Abbott, some of AbbVie's most important metrics, including its dividends, have generally grown at a good clip.
ABBV Revenue (Quarterly) data by YCharts
But this year, the drugmaker lost U.S. patent exclusivity for what has been its biggest cash cow in this period: immunology drug Humira. Considering it hit peak annual sales of $21.2 billion last year, generic drug manufacturers naturally rushed to get a piece of this enormous pie. That's why AbbVie's top line and stock price are declining this year. The company's revenue in the second quarter dropped by almost 5% year over year to $13.9 billion.
Even so, AbbVie remains a solid pick for long-term investors. The company has several medicines that should eventually fill the gap Humira left, including its two other immunology blockbusters, Skyrizi and Rinvoq, migraine treatment Qulipta, and its Botox franchise. Those are among AbbVie's already approved products. The company's pipeline -- which features several dozen programs -- should lead to brand-new drugs.
That's what should matter most to investors, at least those looking for "forever" stocks: AbbVie's ability to develop new drugs is an essential skill for any pharmaceutical company that intends to last. So, while AbbVie's sales may be dropping right now as it works through this patent cliff, the company's prospects remain intact thanks to a deep pipeline and growing portfolio of approved medicines.
Meanwhile, the company's dividend yield currently tops 3.97% -- which is highly competitive. AbbVie won't stop rewarding investors with dividend increases anytime soon. And thanks to products that are essential to patients, AbbVie is an excellent pick for long-term-oriented investors looking for reliable income stocks.
