My #1 Dividend Stock
Marc Lichtenfeld, Chief Income Strategist
The volatility in the market is providing us with some incredible opportunities. Quality companies have gone on sale – some with much higher yields than normal.
Today, we have the chance to purchase a great company and capture a splendidly high dividend.
The healthcare sector has long been one of my favorite sectors to invest in.
That continues to this day, and it has nothing to do with COVID-19.
Over the next six years, global spending on pharmaceuticals is expected to increase from $904 billion to $1.4 trillion.
You definitely want exposure to healthcare stocks right now and over the long term
AbbVie (NYSE: ABBV) is my favorite large cap pharma company for capital gains and my top dividend stock for a lifetime of income.
AbbVie alone will likely have at least five drugs that generate revenues of more than $2 billion each this year… and it will perhaps have another two very shortly.
Humira is the bestselling drug in the world. The medication for arthritis, psoriasis, Crohn’s disease and graft-versus-host disease generated more than $21.2 billion in sales in 2022.
Cancer fighter Imbruvica scored more than $4.5 billion in revenue in 2022. Global Vraylar revenues were over $2 billion.
And AbbVie’s Botox sold more than $2.7 billion, and cancer drugs Venclexta and Skyrizi sold $2 billion and $5.2 billion, respectively.
The big knock on AbbVie is that Humira is off-patent outside the United States and just lost patent protection within the U.S. in 2023.
But AbbVie’s constant innovation will help make up for the loss of Humira…
Skyrizi is expected to be a more attractive alternative to Humira in the treatment of psoriasis, as it requires fewer injections per year.
Rinvoq (for arthritis) is also forecast to be a blockbuster.
And AbbVie has a large pipeline with more potential big revenue generators.
On December 16, 2022, AbbVie announced Food and Drug Administration (FDA) approval of Vraylar as an adjunctive treatment for major depressive disorder.
On November 23, 2022, AbbVie announced European Commission approval of Skyrizi for the treatment of moderate to severe active Crohn’s Disease.
The company also teamed up with Harvard University to develop treatments for viruses, with an emphasis on coronaviruses.
A Massive Perpetual Dividend Raiser
For 2023, AbbVie raised its quarterly dividend another 5% from $1.41 per share to $1.48 per share. That $5.92 annual dividend provides a 3.81% yield. Investors who bought in when I first recommended the stock in 2016 in The Oxford Income Letter have a total return of 175%.
The company has raised its dividend every year since its inception in 2013, increasing it by an astonishing 270%.
I expect AbbVie to continue to boost its payout to shareholders for the foreseeable future.
In 2022, the company generated nearly $23 billion in free cash flow while paying out about $10 billion in dividends.
It accomplished this despite the negative impacts of a weak global economy – particularly on its Allergan beauty products franchise, whose products are widely used aesthetically. (Botox is the franchise’s bestseller.)
A recession may impact Botox sales, but tough economic times aren’t going to cause many people to stop taking their Humira for Crohn’s disease, their Tarka for high blood pressure or their Kaletra for HIV.
And while the overvalued tech sector has tanked… this value play is near its highs. But it’s still a bargain.
The stock trades at just 14 times 2023’s forecast earnings for a very low price-to-earnings to growth (PEG) ratio of 1.3.
Some of Wall Street’s heavy hitters must think it’s cheap too. Vanguard owns more than 8% of the shares and BlackRock owns nearly 7%.
Renaissance Technologies, one of the most successful hedge funds in history, owns more than 13 million shares.
I expect AbbVie, helped by its juicy yield, to outperform growth stocks and the entire S&P 500 as outstanding value plays take center stage.
If you don’t yet own AbbVie, now’s the time to grab some shares.
Action to Take: Buy AbbVie (NYSE: ABBV) at the market. Place a 25% trailing stop.
Last Updated: April 2023