These companies have compelling track records.
There are great reasons to follow Warren Buffett’s lead and buy stocks with the goal of holding them forever. For instance, there are tax advantages when you hold equities for a long time. Also, when you purchase shares of dividend stocks and opt to reinvest the payouts, the compounding effect can work its magic. Research shows that most of the S&P 500‘s returns since 1960 can be attributed to reinvested dividends and compounding.
Of course, not just any dividend stock will do. They aren’t all created equal. That said, let’s consider two dividend stocks that look like excellent “forever” picks: AbbVie (ABBV 0.07%) and Novartis (NVS -0.22%).
1. AbbVie
For a long time, AbbVie’s biggest growth driver was Humira, a medicine for various autoimmune disorders. While Humira’s loss of exclusivity last year stung for a while, the drugmaker is now moving forward. In the second quarter, AbbVie’s revenue increased by 4.3% year over year to $14.5 billion.
The rest of the company’s immunology lineup is helping to smooth out Humira’s declining sales. Skyrizi and Rinvoq, two medicines whose indications substantially overlap with Humira, are growing their sales rapidly. Management expects them to post combined sales of more than $27 billion by 2027, and continue growing their sales well into the next decade. Humira’s annual revenue peaked at $21.2 billion.
Furthermore, AbbVie is developing newer medicines. The company recently announced it had submitted an application to the U.S. Food and Drug Administration for telisotuzumab vedotin, a potential treatment for non-small cell lung cancer. It also recently announced positive phase 3 results for tavapadon, a potential medicine for Parkison’s disease. That’s two brand-new drugs AbbVie could launch within the next couple of years.
Earning new approval will be a recurring event with the drugmaker; its pipeline features dozens of ongoing programs. AbbVie is competent enough to get around one of the most important patent cliffs in the industry’s history and start growing its sales again a little over a year later. That speaks volumes about its innovative abilities, necessary for any pharmaceutical company to succeed in the long run.
Its dividend track record is impressive, too. AbbVie is a Dividend King with an active streak of 52 consecutive payout increases. It currently offers a yield of 3.2%, well above the S&P 500’s average of 1.3%. In short, AbbVie is a top pick for income seekers focused on the long game.
2. Novartis
Novartis is another leading drugmaker with an extensive lineup of approved products. Several of the company’s medicines are doing much of the heavy lifting in driving its top line in the right direction. That list includes heart failure medicine Entresto, whose sales in the second quarter grew by 25% year over year to $1.9 billion. Another one is cancer drug Kisqali, whose revenue landed at $717 million for the period, up 45% compared to the year-ago quarter.
Of Novartis’ 20 top brands, 14 grew their sales on a year-over-year basis during the quarter. Total revenue jumped by a solid 9% year over year to $12.5 billion.
Several Novartis products will remain important growth drivers in the medium term. However, the company will also rely on newer medicines. One is Fabhalta, a treatment for proteinuria (protein in urine) in patients with IgA nephropathy, a kidney disease; Fabhalta earned the green light in August.
Novartis argues that there’s an unmet need here. Despite the availability of treatment options, 50% of IgA nephropathy patients with proteinuria progress to kidney failure 10 to 20 years after being diagnosed. The company is working on another potential therapy for IgA nephropathy called atrasentan, and recently filed an application for approval for this treatment.
Since spinning off its generics and biosimilars unit last year, Novartis’ focus is now entirely on developing innovative new medicines. Its pipeline has a little over 100 programs.
On the dividend front, Novartis’ forward yield currently tops 3.3%. And its streak of 27 consecutive payout hikes is nothing to sneeze at these days. Novartis should continue rewarding shareholders with dividend hikes for a long time.