Over the past decade, AbbVie (ABBV 0.76%) and Mastercard (MA 0.96%) have produced strong market returns. Their performance is even better once we account for dividends reinvested. That is one of the reasons income investing is so powerful: Dividends can significantly boost long-term returns. With that said, here is why AbbVie and Mastercard remain excellent dividend picks today.
Image source: Getty Images.
1. AbbVie
There is at least one thing that makes AbbVie an outstanding dividend stock. The company is a Dividend King, that is, a corporation with at least 50 straight years of payout increases. This is no easy feat and speaks volumes about AbbVie's business.
While the past is not a guarantee of future performance, AbbVie looks likely to keep growing its dividends for a long time. The company's vast portfolio of medicines across multiple therapeutic areas and deep pipeline allow it to generate consistent revenue and earnings while overcoming patent cliffs.
NYSE: ABBV
Key Data Points
Meanwhile, AbbVie can expand its pipeline through acquisitions or licensing deals, as it has done numerous times in recent years. Further, AbbVie has a resilient, defensive business that performs relatively well even when the economy is down, allowing it to keep the dividend hikes coming even amid severe challenges.
AbbVie should also capitalize on long-term tailwinds -- such as the world's aging population -- that will drive growing demand for pharmaceutical drugs. These factors all make AbbVie an ideal stock for dividend-seekers.
2. Mastercard
Though it isn't primarily known for its dividend program, payment processing giant Mastercard is an excellent dividend stock. Over the past decade, the company has increased its payouts by almost 358%. There is much more where that came from, considering its strong business, the vast opportunities in the market Mastercard operates in, and the company's competitive advantage.
Mastercard helps process credit and debit card transactions, pocketing a fee for each. Though payment volume tends to drop when the economy isn't doing well, since Mastercard doesn't issue the cards itself, it is at least immune to credit risk. The financial services specialist tends to perform relatively well even in bad times.
NYSE: MA
Key Data Points
Then, there is the company's large addressable market. Though digital payment methods seem ubiquitous, there is a lot of work to be done -- and plenty of cash and check volume to bring into its ecosystem. Compared to its main competitor, Visa, Mastercard is particularly exposed to markets with lower credit card penetration. The company has estimated a roughly $12.5 trillion opportunity.
It won't capture this entire market on its own, but it is well positioned to be one of the biggest winners of the ongoing cash-displacement phenomenon. Mastercard benefits from a strong moat thanks to the network effect -- it will be challenging to knock the company out of its leading position in its niche. That's why the stock could continue delivering solid returns along with consistent dividend hikes for a long time.
