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2 Top Dividend Kings to Buy for the Long Haul

Trusted dividend stocks tend to both perform well compared to the broader market and consistently raise their dividends, regardless of what’s going on in the world.
The most respected dividend stocks are those that have increased their payouts for at least 50 consecutive years. These stocks are called Dividend Kings. Two of the 39 Dividend Kings are pharma stocks Johnson & Johnson (NYSE: JNJ) and AbbVie (NYSE: ABBV). Let’s take a look at why these two stocks could be smart buys for the long run. 
1. Johnson & Johnson
While the S&P 500 index has fallen 14% year to date, J&J has gained 3% during that time. J&J is one of the most reliable stocks in volatile equity markets, and for good reason.
The company possessed more than a dozen blockbusters in its product portfolio in 2021, including its mega-blockbuster immunology drug Stelara, antipsychotic drug franchise Invega, and a cancer drug co-owned with AbbVie called Imbruvica. Along with the company’s COVID-19 vaccine, this unmatched product portfolio helped J&J to grow its sales by 13.6% to $93.8 billion in 2021.
And with 94 projects in clinical development or the registration phase (i.e., submission to regulatory authorities), the company’s future growth prospects look healthy. Thus, it’s not hard to see why analysts believe J&J will grow its earnings at 4.6% annually over the next five years.
This growth should allow the company to build on its 60 straight years of dividend boosts. That is especially the case given that J&J’s dividend payout ratio is expected to be about 43% in 2022. That’s why I am projecting 6% to 7% annual dividend increases in the years ahead, which is an attractive growth rate considering J&J’s 2.6% dividend yield. 
And the valuation is the factor that seals the deal to make the stock a buy for long-term investors. J&J is trading at a forward price-to-earnings (P/E) ratio of 17.1. This is a bit higher than the forward P/E ratio of 16 for the S&P 500 healthcare sector, but it’s well deserved for a stock of J&J’s quality.
Image source: Getty Images.

2. AbbVie
Like J&J, AbbVie has also outperformed the S&P 500 so far this year. AbbVie’s stock is up 7% year to date. 
AbbVie’s product portfolio also contained more than a dozen blockbusters in 2021. These products include the top-selling drug in the world Humira (treating a variety of autoimmune diseases), Botox Therapeutic and Botox Cosmetic, and immunology drug Skyrizi. This robust product portfolio explains how AbbVie’s net revenue surged 22.6% higher in 2021 to $56.1 billion. 
The company’s growth will be challenged in the near future, which is due to the fact that Humira’s U.S. patent is expiring in 2023. But even with that being the case, AbbVie has five dozen compounds in development at this time. That’s why analysts are projecting 2.1% annual earnings growth over the next five years, which I think is a low bar for AbbVie to clear. 
The stock’s dividend payout ratio is set to be about 40% in 2022. Even with the company’s earnings set to temporarily decline in 2023, this should be a large enough cushion to keep up mid-to-high single-digit annual dividend growth in the years to come. This is a respectable growth rate for a stock that offers investors a 3.9% dividend yield. 
The cherry on top is that AbbVie’s forward P/E ratio of 10.3 is well below the S&P 500 pharmaceutical industry average of 13.5. Even with Humira’s looming U.S. patent expiration, this makes the stock a solid pick to buy and hold forever. 
Kody Kester has positions in AbbVie and Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy. –

Trusted dividend stocks tend to both perform well compared to the broader market and consistently raise their dividends, regardless of what’s going on in the world.

The most respected dividend stocks are those that have increased their payouts for at least 50 consecutive years. These stocks are called Dividend Kings. Two of the 39 Dividend Kings are pharma stocks Johnson & Johnson (NYSE: JNJ) and AbbVie (NYSE: ABBV). Let’s take a look at why these two stocks could be smart buys for the long run. 

1. Johnson & Johnson

While the S&P 500 index has fallen 14% year to date, J&J has gained 3% during that time. J&J is one of the most reliable stocks in volatile equity markets, and for good reason.

The company possessed more than a dozen blockbusters in its product portfolio in 2021, including its mega-blockbuster immunology drug Stelara, antipsychotic drug franchise Invega, and a cancer drug co-owned with AbbVie called Imbruvica. Along with the company’s COVID-19 vaccine, this unmatched product portfolio helped J&J to grow its sales by 13.6% to $93.8 billion in 2021.

And with 94 projects in clinical development or the registration phase (i.e., submission to regulatory authorities), the company’s future growth prospects look healthy. Thus, it’s not hard to see why analysts believe J&J will grow its earnings at 4.6% annually over the next five years.

This growth should allow the company to build on its 60 straight years of dividend boosts. That is especially the case given that J&J’s dividend payout ratio is expected to be about 43% in 2022. That’s why I am projecting 6% to 7% annual dividend increases in the years ahead, which is an attractive growth rate considering J&J’s 2.6% dividend yield. 

And the valuation is the factor that seals the deal to make the stock a buy for long-term investors. J&J is trading at a forward price-to-earnings (P/E) ratio of 17.1. This is a bit higher than the forward P/E ratio of 16 for the S&P 500 healthcare sector, but it’s well deserved for a stock of J&J’s quality.

Image source: Getty Images.

2. AbbVie

Like J&J, AbbVie has also outperformed the S&P 500 so far this year. AbbVie’s stock is up 7% year to date. 

AbbVie’s product portfolio also contained more than a dozen blockbusters in 2021. These products include the top-selling drug in the world Humira (treating a variety of autoimmune diseases), Botox Therapeutic and Botox Cosmetic, and immunology drug Skyrizi. This robust product portfolio explains how AbbVie’s net revenue surged 22.6% higher in 2021 to $56.1 billion. 

The company’s growth will be challenged in the near future, which is due to the fact that Humira’s U.S. patent is expiring in 2023. But even with that being the case, AbbVie has five dozen compounds in development at this time. That’s why analysts are projecting 2.1% annual earnings growth over the next five years, which I think is a low bar for AbbVie to clear. 

The stock’s dividend payout ratio is set to be about 40% in 2022. Even with the company’s earnings set to temporarily decline in 2023, this should be a large enough cushion to keep up mid-to-high single-digit annual dividend growth in the years to come. This is a respectable growth rate for a stock that offers investors a 3.9% dividend yield. 

The cherry on top is that AbbVie’s forward P/E ratio of 10.3 is well below the S&P 500 pharmaceutical industry average of 13.5. Even with Humira’s looming U.S. patent expiration, this makes the stock a solid pick to buy and hold forever

Kody Kester has positions in AbbVie and Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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