Not all dividend stocks are equal. Some are safer than others. Some have much higher dividend yields than others. When a stock offers both advantages, it's usually a keeper.
Three Motley Fool contributors have found stocks with mouthwatering dividends that you can buy right now. Here's why they picked Gilead Sciences (GILD -0.32%), Organon (OGN 0.74%), and Pfizer (PFE 0.23%).
A safe, reliable dividend payer
Prosper Junior Bakiny (Gilead Sciences): When looking for solid dividend-paying stocks, a high yield isn't everything -- but it sure is nice. Gilead Sciences, a leading biotech company, currently offers a yield of 4.80%, much higher than the S&P 500's average of 1.35%. Gilead Sciences' juicy yield is partly due to it underperforming in recent years, but investors shouldn't fear a dividend cut.
The drugmaker's underlying business remains pretty solid despite appearances. Gilead Sciences is one of the leaders in the HIV drug market thanks to medicines like Biktarvy, Descovy for PrEP (pre-exposure prophylaxis), Sunlenca, and others. The company's pipeline in this area features many programs, including brand-new products and potential label expansions.
Translation: Gilead Sciences should maintain its lead in HIV for a while. That franchise is the company's biggest growth driver, so it's essential for Gilead Sciences to continue innovating here. On that front, there is little to worry about. Gilead Sciences isn't just an HIV company, though. The company's recent work in oncology is showing significant progress. It also develops vaccines and medicines for the hepatitis B virus, various inflammatory diseases, etc.
Gilead Sciences' greatest strength lies in its ability to develop newer and better medicines -- including lifesaving ones. The need for those won't subside anytime soon. So, Gilead Sciences is still well positioned to deliver strong results over the long run. The company's payouts have increased by a strong 79% in the past decade. Investors should expect the biotech to keep that momentum.
A high-yielding stock that has been quietly soaring this year
David Jagielski (Organon): It has been three years since healthcare giant Merck spun off Organon, which focuses on medicines aimed at women's health. Organon has been paying a dividend since then and has slowly become a dependable income stock today. And right now, it yields 5.4%. That's even as the stock has soared more than 40% this year.
Organon hasn't raised its dividend, but that's something that could be a possibility, given its low payout ratio of around 30%. In its most recent quarter, which covered the first three months of the year, the company reported that its earnings per share rose by 11% to $0.78 -- well above the $0.28 it pays per quarter to shareholders.
This year, the company projects its revenue to come in between $6.2 billion and $6.5 billion, which would imply a modest 1% revenue growth at the midpoint. Merck spun off Organon so that it could focus its core operations on growth. Organon isn't a fast-growing business, but it's a solid dividend stock. And with a few years under its belt and Organon proving that it can generate consistent free cash flow and profits, investors are taking note -- hence the stock's rally thus far in 2024.
If your primary goal is a good dividend stock, Organon looks like an excellent option. It's also cheap, trading at just five times earnings with a price-to-sales multiple of less than one.
The dividend isn't the only thing attractive about this stock
Keith Speights (Pfizer): Income investors will probably be immediately drawn to Pfizer's forward dividend yield of over 5.8%. They'll like even more that the big drugmaker is committed to maintaining and growing its dividend. But the dividend isn't the only thing attractive about this stock.
Believe it or not, Pfizer could offer solid growth in the coming years. That might be surprising, considering the challenges the company faces. Pfizer's COVID-19 product sales are sinking. Several of its best-selling drugs will lose patent exclusivity over the next few years. This is admittedly not an ideal formula for growth.
However, I think the worst is over for Pfizer's COVID-19 franchise. The potential launch of the company's combination COVID-flu vaccine next year could help turn things around somewhat. Don't expect Pfizer to return to the heady sales volumes seen in 2021 and 2022, but any improvement will help.
Unfortunately, Pfizer won't be able to do much to prevent sales declines for its products that are facing a looming patent cliff. The good news, though, is the company has planned for this inevitable scenario. It has invested in research and development and used its COVID-filled coffers to make multiple acquisitions in recent years.
As a result, Pfizer thinks it will generate an additional $20 billion in revenue from new products and new indications by 2030. By then, the company also projects roughly $25 billion in new revenue from business development (primarily acquisitions).
Are these improving prospects baked into Pfizer's share price? Nope. The stock trades at only 12.8 times forward earnings. Pfizer's dividend is certainly attractive. But so are its growth potential and valuation.
