3 Dividend Aristocrats to Buy in August
Track records matter. And when it comes to dividends, there is a group of stocks that have particularly impressive track records. These stocks don’t just reliably pay dividends; they have consistently increased their dividends for 25 or more consecutive years.
I refer, of course, to the dividend aristocrats. Not every member of this elite group is a great choice to buy right now, but some are. Here are three dividend aristocrats to buy in August.
AbbVie (ABVV -4.17%) increased its dividend for 50 consecutive years. That makes the big drugmaker both an aristocrat and a dividend king. AbbVie has increased its dividend by more than 250% since 2013, with the dividend yield now exceeding 3.7%.
However, it is not just the dividend that has increased enormously. AbbVie’s stock price has climbed more than 120% over the past three years. The stock ranked as the third best performing dividend aristocrat in the first half of 2022.
The main hurdle for AbbVie is that the autoimmune disease drug Humira will face biosimilar competition in the United States from next year. This will represent a significant challenge for the company as Humira generated nearly 37% of total revenue in 2021.
However, AbbVie has many rising stars in its product line. The company should quickly return to growth after the first blow of Humira’s loss of exclusivity. Headwinds are also already largely priced into the stock, with AbbVie shares trading at just 10.6x expected earnings.
2. Abbot Laboratories
Abbott Laboratories (ABT -1.38%) has a 50-year history of annual dividend increases like AbbVie does. It’s no coincidence: until 2013, AbbVie was part of Abbott. Since the separation of the two companies, Abbott has increased its dividend by more than 235%.
There are, however, a few distinct differences between the two healthcare companies. Abbott’s dividend yield is just 1.7%. Its stock performance has also lagged well behind that of AbbVie over the past three years and so far in 2022.
However, Abbott’s business remains strong. The company holds market-leading positions in all areas in which it operates, including diagnostics, generic drugs and nutrition. Abbott reported organic revenue growth of 14.3% year-over-year in the second quarter. It also raised its full-year 2022 earnings forecast.
Abbott’s COVID-19 testing revenue expected to decline. But the possibility of another wave of coronavirus in the fall and winter could boost sales in the short term. The company also has several other growth drivers, including its FreeStyle Libre continuous glucometers.
PepsiCo (DYNAMISM 0.07%) is owned by the same club as AbbVie and Abbott, increasing its dividend for 50 consecutive years. Its dividend payout has more than doubled over the past 10 years. Pepsi’s yield now stands at almost 2.7%.
The stock has not consistently outperformed the S&P 500 in recent years. But even if Pepsi’s stock price is down slightly in 2022, it easily beats the market. Investors were attracted by the stability of the company’s drinks and snacks business.
Pepsi’s second-quarter results showed its business largely insulated from inflation. That’s a huge plus with inflation at 40-year highs. The company continues to show strong growth while passing on price increases to customers.
It is possible that Pepsi will lag the market after the current downturn ends. However, until that happens, the stock appears to be one of the best dividend aristocrats to buy.
Keith Speights holds positions at AbbVie and PepsiCo. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.