Pharmaceutical giant Novo Nordisk(NYSE: NVO) is a terrific stock for many reasons. The company continues to deliver excellent financial results thanks to a lineup of medicines with incredibly fast-growing sales. Its pipeline also continues to produce more gems.
Novo Nordisk's stock market performance has been incredible in recent years. It's hard to find a better growth stock among similarly sized drugmakers. However, it isn't a particularly good dividend stock.
Investors looking for solid, reliable dividend payers might want to look elsewhere. AbbVie(NYSE: ABBV) is a much better option in that department. Read on to find out why.
AbbVie's track record versus Novo Nordisk's
Novo Nordisk pays dividends twice a year, in March and August. Although its dividend per share has increased over the years, the growth isn't hugely impressive. Novo Nordisk's forward yield of 1.13% isn't competitive, either. The drugmaker's profile in this department isn't what dividend investors typically look for.
NVO Dividend data by YCharts.
AbbVie's looks much better. The company pays a quarterly dividend and boasts a forward yield of 3.2%, much higher than the S&P 500's average of 1.32%. AbbVie became a stand-alone company in 2012 after it split from its former parent company, Abbott Laboratories.
Since then, it has increased its payouts by an impressive 288%. When including the time it spent as a division of Abbott Laboratories, AbbVie is considered a Dividend King with an active streak of 52 consecutive payout increases -- a rare feat.
AbbVie's dividend profile looks far better than Novo Nordisk's, but is that enough?
More than a dividend stock
A company's forward yield, dividend per share, frequency of dividend payment, or historical increases can tell us a lot. However, none of that matters if the corporation's underlying business is in shambles.
Investors were recently reminded that even top dividend stocks can cut their payments when the going gets rough. Walgreens Boots Alliance and Medical Properties Trust -- two otherwise solid dividend stocks, or so we thought -- decreased their payouts over the past year. Could the same happen to AbbVie?
There's always that possibility, but the drugmaker's dividend looks safe. AbbVie lost U.S. patent exclusivity for its former crown jewel -- immunology medicine Humira -- last year. But it's marching forward and delivering strong financial results, all things considered.
In the second quarter, AbbVie's revenue increased by 4.3% year over year to $14.5 billion. Top-line growth rates in the high single digits and low double digits are generally considered pretty good for large pharmaceutical companies. AbbVie is below that, but let's put things in context.
Humira is the best-selling medicine in the history of the industry and peaked at annual sales of $21.2 billion in 2022. It's not rare for drugmakers to go through a couple of years of declining revenue following major patent cliffs. After just a year-and-a-half of losing the biggest cash cow in the pharmaceutical world, AbbVie is already back to top-line growth. That's impressive and speaks volumes about its underlying business.
Skyrizi and Rinvoq -- AbbVie's Humira successors -- are doing much of the heavy lifting. Both are immunology medicines, and the company expects their sales to continue growing at a good clip well into the 2030s. It also has several other growth drivers, not to mention a pipeline with dozens of ongoing programs.
AbbVie should succeed in developing and marketing new products to improve its lineup and get around future patent cliffs. The company's business looks strong enough to sustain many more dividend hikes at a rate approaching what it has provided since its inception. That makes AbbVie a much better dividend stock than Novo Nordisk.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
