These companies can lend growth and dividend returns to a long-term investor’s portfolio.
Dividend stocks can offer a fantastic way to magnify your returns with time and offer additional cash to reinvest or keep on the sidelines as savings. Not all dividend stocks are alike, and it’s important to consider various elements of the underlying business to make sure the company aligns with your overall portfolio objectives.
The best dividend stocks have a history of paying and raising dividends, and strong businesses that can uphold these payouts. Here are two top dividend stocks to consider for your portfolio right now.
1. AbbVie
AbbVie (ABBV -0.59%) was created as a spin-off of healthcare giant Abbott Laboratories over a decade ago. This means that the company garnered its parent company’s dividend history, which spans 52 years and counting of consecutive dividend increases. The stock yields around 3.1% based on current share prices, with an annual dividend of approximately $6.20. Over the trailing five-year period alone, AbbVie’s dividend has risen in the ballpark of 45%.
AbbVie’s biggest hurdle right now is the loss of patent exclusivity on the autoimmune disease drug Humira, which was at one time the world’s top-selling drug. The company does have plenty of other well-known products in its portfolio, and a fast-developing pipeline to deal with this patent cliff, one that management had been planning for over many years. In the second quarter of 2024, AbbVie’s net revenue totaled $14.5 billion, up 4.3% from the prior year’s quarter. This growth was enabled by a 2.3% increase in revenue derived from its immunology portfolio and a 10.5% revenue hike in its oncology portfolio.
Top-selling AbbVie products include Skyrizi (used for the treatment of plaque psoriasis, psoriatic arthritis, and Crohn’s disease), Rinvoq (used for the treatment of conditions including rheumatoid arthritis, active psoriatic arthritis, and Crohn’s disease), and Venclexta (an oral therapy for certain blood cancers). Q2 revenue from these three drugs — Skyrizi, Rinvoq, and Venclexta — rose roughly 45%, 56%, and 12%, respectively, from one year ago.
A newer addition to AbbVie’s portfolio is Elahere, approved for the treatment of numerous cancers, including epithelial ovarian cancer, fallopian tube cancer, and primary peritoneal cancer. The drug was acquired in the company’s purchase of Immunogen, which it completed earlier this year.
In the phase 3 study of Elahere, it became the first drug to achieve an overall survival benefit in patients with platinum-resistant ovarian cancer (those who experience disease progression or little response to treatment early in the treatment process). Elahere was granted accelerated approval in late 2022 and only achieved full approval from the U.S. Food and Drug Administration earlier this year, but it’s on track to bring in $500 million in sales in 2024 and could bring in peak annual sales of $2 billion by the end of the 2020s.
Other top-selling products in AbbVie’s wheelhouse include Botox Therapeutic, Botox Cosmetic, and Vraylar (used in the treatment of schizophrenia, bipolar mania, bipolar depression, and major depressive disorder), along with migraine medications Ubrelvy and Qulipta. In the first half of 2024, AbbVie brought in $2.75 billion in net earnings, a healthy 21% increase from the same period last year. With a portfolio of profitable products, a long-standing commitment to its dividend, and a superior growth runway ahead, income investors and those with other investing styles can find plenty to like about this stock.
2. Kraft Heinz
Kraft Heinz (KHC 1.23%) was created as the result of a merger between H.J. Heinz Company and Kraft Foods in 2015. Both companies had histories stretching back well over a century. The modern Kraft Heinz is known for namesake brands Kraft and Heinz, and brands like Velveeta, Jell-O, Oscar Mayer, Maxwell House, and Lunchables.
The company has dealt with some struggles since its 2015 creation, along with headwinds from economic shifts during the pandemic’s height and post-pandemic. In 2019, Kraft Heinz slashed its dividend and enacted a $15 billion writedown on its iconic brands following news that it was undergoing a Securities and Exchange Commission (SEC) probe. In September 2021, the SEC charged Kraft Heinz and two former executives for what it alleged were years-long accounting schemes.
The company ended up paying $62 million to the SEC as part of a settlement, along with issuing restatements of several years of financial reporting. Kraft Heinz has gone through a few CEO changes since its scandal. While the company sells brands categorized as consumer staples, the economic turmoil that has followed the pandemic era has still affected spending, even in more essential areas which will take time to recover.
It’s worth noting that Kraft was faithfully paying a dividend prior to its merger with H.J. Heinz. Kraft Heinz yields 4.6% based on current share prices, partly a function of its tepid stock performance. That generous dividend yield is about three times higher than what the average stock trading on the S&P 500 pays, and helps make up for the fact that the stock is down year to date and up just single digits from one year ago. Its forward annual dividend is $1.60 per share.
This isn’t a high-growth stock, but one that can provide successive income for long-term shareholders that revolves around a storied lineup of brands. Kraft Heinz has been reworking and rebranding its lineup of well-known brands, and while growth figures are still heavily affected by consumer spending patterns, the company remains profitable.
Over the trailing 12 months, Kraft Heinz has reported net income just shy of $2 billion on revenue of $26 billion. It’s also delivered operating cash flow of $4 billion and free cash flow of approximately $2.3 billion in that same time frame. Kraft Heinz has actively worked to right the ship in recent years and stabilize business growth. It remains a leader among food and beverage companies globally.
The stock also trades at a modest valuation of 1.7 on a price-to-sales basis, which is in line with recent historical levels. While Kraft Heinz can only control shifting consumer sentiment to a certain extent, that’s not necessarily a long-term factor in light of a minimum investment of five years or more.
The Oracle of Omaha himself, Warren Buffett, remains a longtime shareholder in the business, with a stake of approximately 26% through multinational conglomerate Berkshire Hathaway. While that fact alone shouldn’t induce you to buy shares, the company’s mainstay presence in the consumer staples space — along with a generous dividend yield — may warrant adding shares to an otherwise well-diversified portfolio.
