There's no better time than October to invest in high-quality dividend stocks. That's because the new month offers a chance to get those dividend payments flowing sooner rather than later.
Three Motley Fool contributors believe they've identified magnificent dividend stocks to buy in October. Here's why they chose AbbVie (ABBV -1.57%), Gilead Sciences (GILD -1.09%), and Johnson & Johnson (JNJ -1.16%).
Attractive in multiple ways
Keith Speights (AbbVie): Only 50 or so stocks can lay claim to increasing their dividend annually for 50 consecutive years or longer. AbbVie is one of them thanks to its impressive 51 straight years of dividend raises.
But that's not the only reason I think this is a magnificent dividend stock to buy in October. There's also AbbVie's dividend yield of 3.9%. Many of its fellow members of the 50-year club offer much lower yields.
AbbVie is a bargain as well. Shares of the big biopharma currently trade at less than 14 times expected earnings. That's a lot lower than the S&P 500's forward earnings multiple of 18.5. It's also well below the pharmaceutical industry average of 16.1.
We do have to address the dark cloud hovering over AbbVie, though. The company's revenue and profits are sinking because of Humira. Sales for its top-selling drug have plunged as a result of new biosimilar competition on the market in the U.S., and this situation isn't going to improve.
However, AbbVie's financial results will improve, and relatively soon. The drugmaker expects to return to growth in 2025. It's been preparing for Humira's eventual loss of exclusivity for a long time. AbbVie already has two worthy successors to Humira on the market -- Rinvoq and Skyrizi -- that are generating tremendous sales growth.
The company's lineup also features other growth drivers including migraine drugs Ubrelvy and Qulipta.
AbbVie should continue to increase its total revenue by a high single-digit percentage through the rest of the decade. I fully expect its great dividend to increase as well.
Stability and a great 4% yield
David Jagielski (Gilead Sciences): One dividend stock that all healthcare investors should consider adding to their portfolios right now is Gilead Sciences. The stock ticks off all the big boxes dividend investors will likely want in an investment.
It offers a high yield of 4% per year. That means if you invest $25,000, you can expect to collect $1,000 in annual dividends. Plus, there's the incentive to not just buy for today's dividend but also hold on for potential long-term dividend growth.
Earlier this year, the company raised its dividend by 2.7%. And over the past five years, the payout has grown by 32%. While the latest increase isn't keeping up with today's inflation rate, it does help to offset it. Gilead also has a sustainable payout ratio of less than 70%, which suggests there's room for more dividend growth in the future.
Another reason dividend investors should consider the stock is its long-term stability. Gilead makes HIV treatments that are essential to patients. That means continuous, recurring revenue.
The company has also been expanding its oncology operations, which can help add even more stability in the long run. For the period ending June 30, Gilead's product sales of $6.3 billion were up 11% year over year when excluding Veklury, its COVID treatment. Revenue from its oncology business grew at a rate of 38% to $728 million, accounting for 11% of the company's top line of $6.6 billion.
Lastly, there's the stock's overall valuation. At 10 times its estimated future earnings, Gilead is a cheap stock to own. By comparison, the average healthcare stock trades at a forward earnings multiple of 18. Overall, Gilead is a magnificent high-yielding dividend stock to hang on to for the long haul.
This dividend is as safe as they come
Prosper Junior Bakiny (Johnson & Johnson): There are plenty of dividend stocks on the market, but few look more solid than Johnson & Johnson. The company's history speaks for itself: It has increased its payouts for 61 consecutive years.
This period includes several administrations, many recessions, a once-in-a-hundred-year global pandemic, and an ever-evolving healthcare sector in which J&J has remained an undisputed leader.
That speaks volumes about the strength of its underlying business. And while its history doesn't guarantee anything, it hasn't lost those attributes that have made it so successful until now. The company's ability to develop newer and better medicines and medical devices is one of the most important. It has a vast portfolio of drugs across many areas, including oncology, immunology, and infectious diseases, among others.
The drugmaker won't stop growing anytime soon because the healthcare industry will never peak. There will always be a need for the kinds of products Johnson & Johnson regularly produces, and the demand is likely to increase over the long run. With improved medicines, people live longer, and the world's population is aging.
Here's the trade-off: They also need more medical care in their golden years. So, companies like J&J have a bright future. And while it has encountered legal troubles of late, they are unlikely to derail its long-term growth. That's why Johnson & Johnson is an excellent stock for investors seeking income and stability in this otherwise volatile market.