We recently compiled a list of the Retirement Stock Portfolio: 7 Safe Dividend Stocks To Invest In. In this article, we are going to take a look at where AbbVie Inc. (NYSE:ABBV) stands against the other dividend stocks.
As investors near retirement, achieving financial stability becomes a top priority. Among the various investment choices, steady dividend payments hold particular appeal for their reliability and security. Dividends, which are a share of a company’s profits distributed to shareholders, offer a dependable source of income.
Research shows a growing trend of Americans retiring earlier than expected, often due to circumstances beyond their control. According to a study by the Transamerica Center for Retirement Studies and the Transamerica Institute, 58% of workers retire earlier than planned. The most frequently cited reasons for early retirement include health-related issues, which account for 46%, followed by employment challenges at 43%, and family obligations at 20%. Interestingly, only 21% cited financial stability as the reason for early retirement. The median retirement age is now 62, falling three years short of the traditional retirement age of 65.
Also read: Retirement Stock Portfolio: 10 Consumer Stocks To Buy
Dividend stocks are becoming an increasingly important component of a well-diversified retirement portfolio for many investors. Carefully selected dividend-paying stocks can provide stability during market downturns and enhance returns during rallies by generating quarterly income that offsets losses and boosts gains. In addition, they can serve as a safeguard against inflation, which has become a growing concern due to rising food and energy costs. Some top-performing companies have consistently increased their dividend payouts year after year for decades. David Giroux, a portfolio manager at T. Rowe Price who manages the firm’s capital-appreciation strategy, spoke about dividend stocks in one of his interviews with Barron’s. Here are some comments from the analyst:
“To have a retirement portfolio that has a significant component of stocks with attractive dividends makes a tremendous amount of sense. If the average company in the market can grow its earnings at 7% to 8% a year, your dividends should be growing at a similar rate.”
Analysts emphasize that while income and growth are essential for savers to sustain a potentially lengthy retirement, this strategy has its limitations and may not suit everyone. They recommend a portfolio diversified across various sectors and companies with substantial cash reserves to support stock buybacks. Dave King, a senior portfolio manager at Columbia Threadneedle Investments, highlighted in an interview with Barron’s the importance of simple diversification. He suggested holding at least eight stocks from different sectors, noting that diversification doesn’t need to be excessive but should include more than a few stocks—ideally more than five, with one representing each broad sector. According to King, when selecting stocks for such a portfolio, it’s important to avoid placing too much weight on Wall Street research. Instead, the focus should be on fundamental, historically proven factors like a company’s credit rating or the reputation of its management, which can provide valuable insight into the reliability of its dividend payments.
Dividend growth stocks are highly sought after for a retirement stock portfolio. Data from S&P Dow Jones Indices highlighted their appeal, showing that the Dividend Aristocrats Index delivered a total return of 12.08% from 1990 to 2019. This outpaced the broader market, which had a return of 9.95% over the same period, making these stocks attractive not only to retirees but to investors of all ages. In this article, we will take a look at some of the best dividend stocks for a retirement stock portfolio.
Our Methodology:
For this list, we used a screener to select dividend stocks that have shown at least 10 years of dividend growth and are spread across various industries, making them suitable for a retirement stock portfolio. From the initial selection, we chose seven stocks, each from a different industry, all with yields of at least 2%. Next, we arranged them in ascending order of the number of hedge funds having stakes in them, according to Insider Monkey’s database of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A pharmacist handing out a pharmaceutical drug to a patient in a drug store or chemist.
AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 68
AbbVie Inc. (NYSE:ABBV) is an Illinois-based pharmaceutical and biotech company, offering related products and services to its shareholders. In the past 12 months, the stock has delivered an over 14.3% return to shareholders, reflecting investor confidence in its ability to navigate Humira’s patent expiration. Humira, which was a top-selling drug with peak sales of $21 billion in 2022, experienced a sharp revenue drop after losing patent protection last year. However, AbbVie’s management successfully addressed the impact, offsetting the decline in Humira’s sales, which had previously contributed to about a third of the company’s total revenue.
In the third quarter of 2024, AbbVie Inc. (NYSE:ABBV) reported revenue of $14.46 billion, a 4% increase from the same quarter last year. Its Immunology Portfolio generated over $7 billion in revenue, also showing a 4% year-over-year growth. In August, the company acquired Cerevel Therapeutics, a pharmaceutical firm specializing in neuroscience, for $8.7 billion in cash. This acquisition brought a promising pipeline of drug candidates, including emraclidine, a potential treatment for schizophrenia.
AbbVie Inc. (NYSE:ABBV), one of the best stocks for a retirement stock portfolio, has increased its payouts for 52 years. The company currently pays a quarterly dividend of $1.64 per share and has a dividend yield of 3.74%, as of December 17.
As of the end of Q3 2024, 68 of the 900 hedge funds tracked by Insider Monkey had invested in AbbVie Inc. (NYSE:ABBV), up from 67 in the prior quarter. The total value of these holdings exceeded $2.5 billion.
Overall ABBV ranks 1st on our list of the best stocks for a retirement portfolio. While we acknowledge the potential for ABBV as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ABBV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
