Market crashes can happen, and they usually tend to pull down some great stocks along with the rest of the market. It is impossible to predict the severity and timing of the next downturn in the market, but it is easy to see one happening soon.
These two businesses make dependable dividend payments in bad times and good. Their shares are up near 52-week highs at time of writing, but an overall downturn in the market might pull them down to more attractive prices. Here is why you should add them to your watchlist.
1. Abbott Labs
Abbott Laboratories shares have increased around 26% in 2021. At current prices, the stock provides an anemic 1.4% dividend yield.
Patient investors who have held onto their Dividend Aristocrat shares have watched their quarterly payments increase 77% over the last five years. Despite the large payout bumps, Abbott only required about 33% of the free cash flow that its operations produced over the last year to make its dividend payments. Which means the company should not have any trouble increasing the payout in line with revenue growth in the future.
Abbott earns most of its money by selling medical devices and diagnostics. The company’s medical-device segment is currently under some pressure because of COVID-19. It takes a lot of visits to the doctor before patients are able to receive a replacement heart valve or new pacemaker. Even with pandemic pressure, the medical-device segment sales in the first nine months of 2021 increased 24.5% up to $10.6 billion.
Diagnostics sales in the first nine months of 2021 skyrocketed a whopping 73% year over year to $11.2 billion. Increasing demand for COVID-19 tests is not good news for the medical-device segment, but enhanced diagnostics sales more than make up the difference.
It has been well over 50 years since Abbott went 12 months without increasing its dividend payout. With Abbott’s well-diversified operation, traders can reasonably believe their payouts will continue rising for another ten to twenty years.
The second half of 2021 has been terrible for most drug maker stocks, but not AbbVie. The pharmaceutical giant’s shares are up over 22% this year. Since spinning off from Abbott Labs in 2013, the stock has increased around 271%, but that is not the whole story. Once you factor in the consistently rising dividend payments, traders who held on to their shares have already gotten a 438% total return since the start of 2013.
Over the last eight years, AbbVie’s dividend has increased a whopping 253%, and at current prices, the stock offers a tempting 4.3% yield. Even with the rapid raises, the company required just 42% of free cash flow produced over the last year to meet its rapidly increasing dividend obligation.
AbbVie has provided an above-average dividend ever since its inception because traders are rightfully nervous about the ability of Abbvie to continue raising it in the future. This company’s biggest source of income, Humira, is also the world’s bestselling drug, with sales that have increased 5.6% year over year during the third quarter up to a yearly $21.7 billion.
Humira lost market exclusivity within the European union in 2018, and now 85% of its sales are coming from the U.S. market. In about twelve months, biosimilar versions of the Humira drug that are already approved by the FDA are expected to finally start hammering Humira sales into the dirt.
The Botox brand of the injectable botulinum toxin is a lot more resilient to the loss of exclusivity problems facing Humira because it is not exactly exclusive to begin with. Cosmetic Botox is more popular than it has ever been, with third-quarter sales that increased 39% year over year to a yearly $2.2 billion. Therapeutic Botox sales also increased 23% year over year to a yearly $2.6 billion.
Author: Blake Ambrose