You’d think that investors would be willing to pay a higher price for equities that offer a high dividend every quarter. That isn’t always the case, though. There are a plethora of dividend stocks with appealing valuations. And some of them are quite low-cost. Here are three dividend stocks that are nearly unaffordable.
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AbbVie (abbreviated as AbbVie) is
AbbVie (NYSE:ABBV) is unquestionably one of the top dividend stocks available. Its dividend yields about 5% at the moment. The pharmaceutical company is also on the verge of becoming a Dividend King, a select group of S&P 500 companies that have increased their dividend for at least 50 years.
Right now, the stock is also quite inexpensive. AbbVie’s stock is now trading at around 8.5 times projected earnings. This is significantly lower than most of the company’s big pharma competitors’ forward earnings multiples.
Why is AbbVie so highly regarded? Many investors are concerned that Humira’s exclusivity in the United States may expire in 2023. Currently, the medicine accounts for about 37% of the company’s entire income.
AbbVie, on the other hand, has multiple solid growth drivers in its lineup. Rinvoq and Skyrizi, two newer autoimmune disease medications, Imbruvica and Venclexta, two blood cancer drugs, and Vraylar, an antipsychotic drug, are among them. The corporation anticipates a drop in total sales in 2023, but a return the following year. Throughout the rest of the decade, AbbVie expects high single-digit growth.
Bristol Myers Squibb (Bristol Myers Squibb) is a pharmaceutical company
Bristol Myers Squibb (NYSE:BMY), like AbbVie, is one of Warren Buffett’s favorite bargain large pharma companies these days. With shares cheap at 8.2 times anticipated earnings, it’s even more of a steal than AbbVie.
Bristol Myers Squibb also pays out a respectable dividend. It currently has a yield of around 3.2 percent. Since 2010, the corporation has increased its dividend payout every year.
Another thing that BMS and AbbVie have in common is a shared denominator. Revlimid, the company’s best-selling medicine, will shortly lose its patent exclusivity in the United States. Beginning in 2022, the blood disease medicine will face limited-volume generic competition. In the fourth quarter of 2020, Revlimid represented for over 30% of BMS’ entire revenue.
Bristol Myers Squibb, on the other hand, has a number of products that could make up the slack. Eliquis, a blockbuster blood thinner, and cancer immunotherapy continue to see explosive sales increases. Opdivo, another immunotherapy, is expected to gain traction as more indications are approved. BMS also has a number of novel drugs with a lot of promise, such as the multiple sclerosis treatment Zeposia and the anemia drug Reblozyl.
Viatris 3
Viatris (NASDAQ:VTRS) isn’t technically a dividend stock yet. It will, however, be shortly. The firm was created in November 2020 when Pfizer’s Upjohn division and Mylan merged. Viatris plans to launch a dividend program in the second quarter of this year, with the payout increasing each year after that. The initial dividend yield is estimated to be in the range of 3%.
Viatris is also one of the most cost-effective stocks on the market. Its stock is currently trading at about 4.7 times projected earnings.
As it contends with dwindling revenues for some older products, the business expects 2021 to be a “trough year.” Its free cash flow, on the other hand, should continue to increase. By 2023, Viatris expects to have realized over $1 billion in synergies from the Upjohn/Mylan transaction.
Viatris expects to achieve consistent revenue growth every year beginning in 2024. Once debt is reduced to desired levels, the corporation plans to buy back shares.
Viatris is not a stock that will excite growth investors. In the long run, though, it should be exactly the type of company that income-seeking investors will like.
This post is the author’s own view, which may differ from a Motley Fool premium advice service’s “official” recommendation position. We’re a mishmash! Questioning an investing theory, even our own, encourages us to think critically about investing and make decisions that will make us smarter, happier, and wealthier.
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