Certifications such as the Good Housekeeping Seal help consumers know which products are safe and perform well. Unfortunately, no Good Housekeeping Seal exists for dividend stocks.
However, arguably the next best thing is for a company to belong to the elite group known as Dividend Kings. To qualify, a company must increase its dividend for at least 50 consecutive years. Most income investors will sleep better at night knowing that a stock has such an impressive dividend track record.
But some Dividend Kings are better than others. Which is the best pick right now? Here's my favorite Dividend King to buy in November.
Extending its streak of dividend hikes
Technically, AbbVie (ABBV +0.76%) has only been around since 2013. That doesn't mean the big pharmaceutical company can't be a Dividend King, though. AbbVie's business operated for decades as part of Abbott Laboratories before being spun off as a separate publicly traded entity 11 years ago.
NYSE: ABBV
Key Data Points
AbbVie, therefore, inherits the rich dividend history of its parent. In September, Abbott announced its 52nd consecutive annual dividend increase. Last week, AbbVie followed suit with its latest dividend increase.
Plenty of Dividend Kings have longer streaks of dividend hikes than AbbVie. Few, if any, though, can match the drugmaker's level of dividend increases in recent years. Since its spinoff from Abbott, AbbVie has raised its dividend payout by a whopping 310%.
Some Dividend Kings don't offer princely dividend yields. However, AbbVie's forward dividend yield is 3.26% -- nearly 2.7 times higher than the yield of the S&P 500 (^GSPC 0.44%). The big pharma stock's yield would be even higher, except AbbVie's share price has soared 30% this year.
Full steam ahead
I think AbbVie's momentum will continue. Some investors have worried about the negative impact of declining sales of Humira, the company's top-selling drug, with its loss of patent exclusivity last year. Not me. I've been confident in AbbVie's strategy to navigate these challenges, and my confidence appears to be paying off.
In the third quarter of 2024, Humira's sales fell 36.5% year over year on an operational basis due to biosimilar competition. Yet AbbVie's overall revenue increased, with the company delivering sales that were $260 million above its expectations. How did the drugmaker manage this feat? By investing in research and development and making smart acquisitions.
AbbVie CEO Rob Michael said in the Q3 earnings call that the company expects Humira's successor products, Skyrizi and Rinvoq, to rake in combined sales of over $17 billion this year. He added, "[W]e see substantial opportunity for continued strong growth well into the next decade."
Other key growth drivers for AbbVie came from its business development deals. For example, the company's acquisition of Allergan in 2020 added products including migraine therapies Qulipta and Ubrelvy, as well as antipsychotic drug Vraylar, to AbbVie's lineup. All three drugs generated double-digit percentage sales growth in Q3.
AbbVie continues to invest heavily in R&D. Its pipeline features over 90 programs. The company's investments have paid off recently with U.S. regulatory approval of Parkinson's disease drug Vyalev.
Michael noted in the Q3 call that AbbVie has completed 15 deals so far this year, including recently closing on its acquisition of Cerevel Therapeutics. CFO Scott Reents said the company's "strong free cash flow also provides capacity for additional business development."
AbbVie's icing on the cake
While many stocks are priced for perfection these days, AbbVie's valuation remains attractive despite its big gains. Shares trade at 16.9 times forward earnings. Even better, the stock's price-to-earnings-to-growth (PEG) ratio based on five-year growth projections is a super-low 0.47, according to LSEG.
AbbVie offers a high dividend yield, an impressive track record of dividend increases, strong growth prospects, and an appealing valuation. It shouldn't be surprising that the stock is my favorite Dividend King to buy right now.
