When it comes to dividend investing, there are two basic approaches you can take. You can look for companies that are raising their dividends at a rapid pace, but these stocks tend to offer low returns. The other primary option available to dividend investors is to buy stocks with really high yields. Unfortunately, stocks are rarely offered Extremely high returns Unless there is concern about their ability to raise or maintain their dividend.
If you can’t decide which dividend investing option you prefer, I have some great news. AbbVie(NYSE: ABF) and W. B. Carey(NYSE: WK) Offering investors the best of both worlds. That’s why they seem like no-brainer buys for 2025.
AbbVie has been a long-term dividend investor’s dream come true since its spinoff from AbbVie Abbott Laboratories In 2013. Abbott investors who wisely held shares of the biopharmaceutical company spin off The dividend payments they offer have seen them rise by 310%. You might expect a stock raising its dividend so quickly to have a low yield, but it’s actually offering an impressive 3.6% yield at recent prices.
AbbVie shares have been pummeled recently because the company’s $8.7 billion investment in Cerevel Therapeutics in 2023 didn’t go as planned. Last November, we learned that Emraclidine, the experimental treatment that attracted AbbVie to Cerevel, failed to improve symptoms in patients with schizophrenia in two phase 2 trials.
Fortunately for AbbVie, Cerevel quickly redeemed itself. Tafapadone, a potential first-in-class treatment for Parkinson’s disease that it has been developing, met its primary endpoint in the phase III TEMPO-2 trial. Treatment with a D1/D5 partial agonist significantly improved patients’ disease staging scores after 26 weeks of treatment.
Within a few years, Tavapadon could start generating annual revenues in the billions. AbbVie looks like a great stock to buy because it can continue to grow its earnings at a rapid pace even without a new Parkinson’s drug.
AbbVie’s flagship drug by sales, Skyrizi, was launched in 2019 and already dominates the psoriasis drug market. During the first nine months of 2024, sales of the injectable therapy rose 48% year over year to $7.9 billion.
Skyrizi isn’t the only relatively young drug lifting AbbVie’s sales. In the first nine months of 2024, Rinvoq, an arthritis treatment also launched in 2019, achieved sales growth of 52% year-over-year to $4.1 billion.
During the 12-month period ending last September, AbbVie generated free cash flow of $15.6 billion. The company used only 70% of this amount to fulfill its dividend obligations. With Skyrizi, Rinvoq and perhaps tavapadon pushing sales higher, patient investors could make heaps of passive income from this stock over the long term.
WP Carey is a real estate investment trust (REIT) that collects rent from a variety of different companies that sign long-term net leases. Income-seeking investors like these types of stocks because they have to hand over at least 90% of their profits to investors as dividend payments. At recent prices, WP Carey’s dividend offers a hefty yield of 6.4%.
Shares of this well-managed real estate investment trust have been under pressure for several reasons that are not important to income-seeking investors considering a new investment in the stock. In 2023, it made the difficult decision to separate its office buildings portfolio into a separate entity and reduce its dividend accordingly.
Low office rents were an unexpected problem that WP Carey dealt with in the best possible way. This nuance does not arise for every investor looking for stability and pulling his dividend scheme.
The recent dividend cut isn’t the only issue weighing on WP Carey’s stock price. Bond traders have expected stronger economic growth, higher inflation and higher debt, pushing yields on 10-year Treasury notes to the highest levels over the past few months. When Treasury yields rise, riskier income-producing assets such as REIT stocks fall.
Taking advantage of WP Carey’s low price gives investors a great opportunity to see great dividend yields grow even further. The company’s largest tenant Extra storage spaceis resilient to economic downturns and contributes only 2.7% of the annual base rent to the REIT.
The well-diversified REIT has already raised its dividend four times since cutting it in 2023. Despite the recent increases, there’s plenty of room for more. Management expects adjusted funds from operations, a proxy for earnings used to value REITs, to reach $4.68 at the midpoint of its guidance range. This is much more than you need to meet the dividend payment currently set at just $3.52 per year.
Adding some of these highly resilient dividend payer stocks to a diversified portfolio now and holding them for the long term seems like a great way for most income-seeking investors to boost their passive income stream.
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Corey Renoir He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool recommends stocking up on extra space. The Motley Fool has Disclosure policy.
