Buy, hold, rake in solid income. That sounds like a pretty good investing strategy. You only have to find the right stocks worthy of holding for the long term and that pay attractive dividends.
Three Motley Fool contributors think they can help out on that front. Here's why they picked AbbVie (ABBV 0.10%), Eli Lilly (LLY +1.83%), and Pfizer (PFE +1.14%) as dividend stocks to buy and hold for the next decade.
An unstoppable passive income machine
Prosper Junior Bakiny (AbbVie): Many dividend investors fear experiencing reduced payouts. In the worst-case scenario, corporations can suspend their dividend programs altogether. Though there are no certainties in life -- or equity markets -- investors can be as confident as possible that AbbVie is unlikely to resort to dividend cuts. That's not just because management has explicitly, repeatedly stated that returning money to shareholders via dividend hikes is one of the company's priorities.
NYSE: ABBV
Key Data Points
CEOs make empty promises all the time. However, AbbVie has demonstrated its commitment to that goal with tangible moves. Since it split from Abbott Laboratories, AbbVie has increased its payouts by 287.5%. Despite recently losing patent protection for what was by far its most important product, immunology medicine Humira, AbbVie has continued to hike its dividend. Further, even without Humira driving top-line growth, AbbVie's underlying business remains solid.
Drugs such as Skyrizi and Rinvoq -- two immunology products -- AbbVie's Botox franchise, migraine treatments Qulipta, schizophrenia therapy Vraylar, and more, will allow the company to get back to revenue growth next year. Beyond that, AbbVie had a deep pipeline that should allow it to modify and improve its product mix regularly. AbbVie is a Dividend King: It has raised its payouts for 52 consecutive years. Its forward yield of 3.69% is well above average.
The company's cash payout is just under 48%, a reasonable number that leaves plenty of room for further dividend increases. Investors looking for income stock to hold on to for a while can safely add the drugmaker's shares to their portfolios.
Eli Lilly gives investors the best of both worlds
David Jagielski (Eli Lilly): Normally when you're thinking about which dividend stocks to buy for your portfolio, you might begin by filtering out investments that only offer modest yields, like the one Eli Lilly pays -- 0.7%. But it would be a mistake to overlook this top healthcare giant as it can make for a fantastic dividend stock to hold over the long run.
NYSE: LLY
Key Data Points
Although its yield looks underwhelming, that's only because of how massive of a growth stock Eli Lilly has been. In five years, the stock's value has risen by more than 500%. But the company's dividend has also doubled during that stretch. Eli Lilly has been generously rewarding shareholders with some large rate hikes. The $1.30 quarterly dividend it currently pays is 15% higher than the $1.13 payment it issued to shareholders a year ago. A decade ago, the company's quarterly dividend was just $0.49.
The key thing for investors to focus on here is the long term. And in the long term, Eli Lilly has fantastic growth prospects thanks to its diabetes and weight loss drugs, Mounjaro and Zepbound. At their combined peaks, they may generate more than $50 billion in annual revenue for the business. While Eli Lilly will invest a lot of its profits back into the business, it's likely to also continue rewarding shareholders along the way.
That means what may seem like a modest dividend income right now may rise quickly over the years. What's more is that you can also profit by hanging on to the stock and benefiting from its valuation, which may continue to rise as Mounjaro and Zepbound rake in billions in revenue for the business. By investing in Eli Lilly, you can get the best of both worlds -- a fast-growing business and dividend.
High yield, low valuation
Keith Speights (Pfizer): Pfizer should be attractive to both income and value investors. It just might appeal to growth investors, too.
NYSE: PFE
Key Data Points
The big drugmaker's dividend yield stands above 6.6%. Pfizer has increased its dividend every year since 2010, and I expect this streak to continue. CFO Dave Denton told analysts in January that growing the dividend is the company's first capital allocation priority.
Pfizer's shares have tanked over the last couple of years due primarily to rapidly declining COVID-19 product sales. I think the sell-off is overdone, though, with shares now trading at a forward price-to-earnings ratio of under 11.9.
2024 could be the low point for COVID-19 vaccine sales, in my opinion. Most individuals who wanted a vaccine last year will probably get another this year. Pfizer hopes to launch a combination COVID-flu vaccine in 2025 that could spark a sales rebound for its COVID-19 franchise.
The company still has another big hurdle to jump, though, with multiple blockbuster drugs losing patent exclusivity over the next few years. The good news is that Pfizer's new products and newly approved indications for existing products should produce enough additional revenue to offset the impact of declining sales for the products facing patent expirations.
A rebound in COVID-19 sales and counterbalancing the impending patent cliff isn't enough to make Pfizer's growth story compelling. However, the pharma giant's business development deals might be. Pfizer expects acquisitions completed in recent years and some that are yet to be made should increase its revenue by roughly $25 billion per year by 2030.
