Passive income is essential in retirement, but building a dependable stream isn't easy. Fortunately, top-tier dividend stocks can do the heavy lifting. The key is focusing on companies with strong yields, reliable payouts, and recession-resistant business models.
In today's volatile market, where uncertainty is the only constant, dividend investing has regained its shine. High-quality stocks that return capital to shareholders offer income stability and a cushion against downside risk.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
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The healthcare sector stands out in this environment. Its essential nature and steady demand make it a natural haven and a fertile ground for income investors.
Two healthcare heavyweights screen as particularly attractive buys in this turbulent market. With generous yields, durable business models, and products the world can't live without, these stocks deliver a potent mix of income and long-term upside. Here's why they belong on your radar right now.
Pfizer: Pharmaceutical giant with an exceptional yield
Pfizer(NYSE: PFE) shares currently offer an eye-catching 7.8% dividend yield, putting this pharmaceutical titan among the highest-yielding stocks in the healthcare sector. This exceptional payout level reflects the market's concerns about the company's growth trajectory following the pandemic revenue boom. With shares trading at just 7.5 times forward earnings, investors are essentially being paid handsomely to wait for the company's next phase of growth.
While Pfizer's payout ratio stands at an elevated 119%, high payout ratios are commonplace in the pharmaceutical industry due to its inherently cyclical nature. Moreover, the company maintains one of the strongest balance sheets in the industry following its COVID windfall, providing ample financial flexibility to sustain its dividend while investing in future growth. Pfizer's diverse portfolio of patent-protected drugs also generates enormous cash flows that support shareholder rewards and ongoing research initiatives.
What's the core value proposition? The drugmaker faces potential policy tailwinds under the new administration, which has signaled interest in correcting the "pill penalty" that currently gives small-molecule drugs just nine years of protection from Medicare negotiation versus 13 years for biologics. Such a change could enhance the economics of Pfizer's substantial small-molecule research programs.
Additionally, Pfizer's decision to divest its off-patent division has resulted in a more focused, innovative organization better positioned for long-term growth. So, with a promising pipeline of new drugs in cancer and immunology, Pfizer offers income investors not just an exceptional current yield but also the potential for meaningful capital appreciation as new blockbuster treatments leave the lab and enter commercial production.
AbbVie: Diversified pharmaceutical giant with steady income
AbbVie(NYSE: ABBV) offers investors a 3.9% dividend yield right now, with shares trading at a forward price-to-earnings ratio of just 14. For context, the benchmark S&P 500 trades at around 19 times forward earnings estimates. The drugmaker has successfully built a diversified portfolio spanning immunology, oncology, and aesthetics that generates consistent cash flow to support shareholder returns.
Humira's loss of exclusivity has created headwinds as biosimilar competition erodes market share. However, AbbVie's newer immunology treatments, Skyrizi and Rinvoq, have demonstrated stronger clinical outcomes for psoriasis, rheumatoid arthritis, and Crohn's disease than conventional therapies. The market has responded favorably to these medications, helping to counterbalance Humira's declining sales.
Beyond immunology, AbbVie maintains strong positions in aesthetics with Botox and oncology with Imbruvica, providing revenue diversification that strengthens the company's overall financial stability. This multifaceted portfolio approach reduces dependence on any single product while creating multiple avenues for future growth.
Despite an elevated payout ratio of 259%, AbbVie's dividend remains well supported by consistent cash-flow generation from its broad product lineup. For income investors seeking healthcare exposure with reliable dividends, AbbVie offers a generous yield with the potential for moderate capital appreciation, as it fortifies its core immunology franchise and expands into other lucrative market segments.
Should you invest $1,000 in Pfizer right now?
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George Budwell has positions in AbbVie and Pfizer. The Motley Fool has positions in and recommends AbbVie and Pfizer. The Motley Fool has a disclosure policy.
