If x is good, isn't 2x even better? Usually. Granted, there can be too much of a good thing. For example, you might regret eating two giant helpings of ice cream rather than one. However, in many cases, upping the ante can work out quite well.
I believe a handful of dividend stocks serve as excellent examples of this. Here are three dividend stocks to double up on right now.
1. AbbVie
AbbVie (ABBV -1.59%) ranks third on the list of the world's largest healthcare companies based on market cap. The big drugmaker markets over 75 products, including 12 blockbuster drugs.
When AbbVie was spun off in 2013 by Abbott Laboratories (ABT -0.68%), the company inherited its parent's impressive track record of paying dividends. Today, AbbVie is a Dividend King (a group of elite stocks that have increased their dividends for at least 50 consecutive years). Its forward dividend yield stands at 2.8%, which is lower than the average in recent years because the share price has increased significantly.
Interestingly, AbbVie's stock has performed admirably despite the company facing stiff competition from biosimilars for its one-time top-selling product, Humira, starting in 2023. This achievement stemmed from AbbVie's shrewd acquisitions that reduced its dependence on Humira and its launch of highly successful new products.
Those new products, especially autoimmune disease drugs Skyrizi and Rinvoq, should enable AbbVie to deliver solid revenue and earnings growth over the next several years. Meanwhile, AbbVie's stock is valued reasonably in a stock market that's priced at a premium, with its forward price-to-earnings ratio of 16.8.
2. Enterprise Products Partners
Enterprise Products Partners (EPD -0.41%) is a master limited partnership (MLP) in the midstream energy industry. It operates over 50,000 miles of pipeline, 45 natural gas processing trains, 26 fractionators, 21 deepwater docks, and facilities that store over 300 million barrels of hydrocarbon liquids.
Two things jump out with Enterprise Products Partners' distribution. First, the distribution yield is an ultra-high 6.9%. Second, the MLP has increased its distribution for 27 consecutive years.
Is this juicy distribution sustainable? I think so. Enterprise Products Partners' business is remarkably stable. Inflation isn't a major worry, with around 90% of its long-term contracts containing inflation-indexed escalation provisions. Enterprise also has a great history of generating strong cash flow per unit regardless of what's going on in the overall economy or in the oil and gas industry.
The MLP has decent growth prospects, too. U.S. production of oil, natural gas, and natural gas liquids (NGLs) is expected to increase through the end of the decade. In particular, the surging adoption of artificial intelligence (AI) is driving greater demand for natural gas as fuel for AI-focused data centers.
3. The Coca-Cola Company
I probably can't tell you much about The Coca-Cola Company (KO -0.85%) that you don't already know. This iconic company has sold soft drinks for 139 years. Coca-Cola also owns multiple other businesses, including Minute Maid, Honest Tea, and Vitaminwater.
Image source: Getty Images.
Like AbbVie, Coca-Cola is a Dividend King. It's been in the club even longer, though, with a sterling track record of 63 consecutive years of dividend increases and counting. Coke's forward dividend yield tops 3%.
I think Coca-Cola is a great dividend stock to double down on right now because it holds up well when volatility is high. That might seem like strange reasoning, considering the stock market is booming. However, valuations are at historically high levels. Warren Buffett's advice rings true to me: "Be fearful when others are greedy." (Buffett, by the way, loves Coca-Cola stock and the company's beverages.)
But what about Coca-Cola's own valuation, with shares trading at 23.6 times trailing 12-month earnings? I have three thoughts. First, this multiple is well below Coke's long-term average price-to-earnings ratio. Second, the strength of the company's business and brand warrants a premium. Third, Coca-Cola's shares trade at roughly 20.5 times forward earnings, which makes the stock's valuation more palatable.
