2 Excellent Dividend Stocks to Buy on the Dip

AbbVie (NYSE: ABBV) and Amgen (NASDAQ: AMGN) have a lot in common. They are both leading drugmakers and have strong dividend track records. Both also recently saw their shares fall significantly in one day, following unimpressive clinical data for otherwise promising candidates.

Despite their recent setbacks, these healthcare giants remain attractive income stocks, especially for investors willing to be patient. Here's why.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

1. AbbVie

Sometimes acquisitions create value for all those involved. Sometimes they don't, as AbbVie is finding out the hard way. The company's $8.7 billion buyout of Cerevel Therapeutics now looks like a waste of money after the leading asset it got from that transaction, emraclidine, failed a pair of phase 2 studies. Since that debacle, AbbVie's shares are down by 13%:

ABBV data by YCharts.

However, the company is still active in mergers and acquisitions, and is already on the offensive. Recently AbbVie closed its acquisition of Aliada Therapeutics, including a promising Alzheimer's disease candidate, for $1.4 billion in cash. And it announced that it will buy out Nimble Therapeutics, which has a pipeline of immunology candidates, for $200 million.

AbbVie is still growing its revenue after the massive patent cliff it experienced with Humira, its former best-selling medicine. The most important therapies in its lineup that are helping smooth out Humira-related losses are the immunology superstars Skyrizi and Rinvoq. In the third quarter, AbbVie's top line increased by 3.8% year over year to $14.5 billion. Sales of Skyrizi and Rinvoq grew by 50% and 45%, respectively -- much faster than any other medicine in the company's portfolio, even though they generate the highest sales aside from Humira. These two will remain important growth drivers for AbbVie into the next decade.

In the meantime, the company will succeed in launching brand-new products. Beyond the acquisitions, which may or may not help, AbbVie has a deep pipeline with dozens of ongoing programs.

Additionally, AbbVie is an exceptional income stock. It's a Dividend King, with 52 consecutive years of payout increases including the time it spent under the wing of its former parent company, Abbott Laboratories. And since it split from Abbott in 2013, AbbVie has increased its dividend by 310%.

The stock's forward yield is now around 3.8%, compared to the S&P 500's average of 1.3%. So despite its recent issues, AbbVie should continue to deliver strong returns and dividend growth for a long time.

2. Amgen

Amgen's recent setback came after it announced positive -- but not positive enough -- phase 2 results for its leading weight loss candidate, MariTide. In the trial, the medicine led to an average weight loss of about 20% after 52 weeks of treatment, with no weight plateau observed. Investors don't seem to think these results are good enough for MariTide to knock the current leaders in the field off their pedestals.

However, Amgen doesn't need to take significant market share away from Eli Lilly or Novo Nordisk to be successful. According to some projections, the weight loss arena will be worth $150 billion by the early 2030s. Amgen's candidate seems to work, and if the company can carve out even a small niche for itself in this fast-growing market, it will still be a win.

The drugmaker can rely on other growth drivers, too. In the third quarter, its revenue increased by 23% year over year to $8.5 billion. Much of that growth was due to last year's acquisition of Horizon Therapeutics for about $28 billion. But even without that, the top line increased by 8% compared to the year-ago period.

Thanks to its buyout of Horizon Therapeutics, Amgen now owns Tepezza, the only medicine approved by the U.S. Food and Drug Administration for thyroid eye disease. The biotech giant could milk Tepezza in ways the smaller Horizon couldn't. Amgen recently earned approval for this medicine in Japan and plans to target many other regions.

Amgen's Tezspire, a medicine for asthma developed with AstraZeneca, is making solid progress as well, both in the clinic and in sales. Amgen also has a deep pipeline, including other weight loss candidates. Its not-too-impressive phase 2 data for MariTide is by no means a deal-breaker and doesn't endanger its dividend.

Amgen has increased its payouts by 201% in the past decade, and its forward yield is now around 3.7%. This is an excellent dividend growth stock to buy and hold.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $349,279!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $48,196!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $490,243!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 16, 2024

Prosper Junior Bakiny 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 Amgen, AstraZeneca Plc, and Novo Nordisk. The Motley Fool has a disclosure policy.