What will be the hottest investing trend on Wall Street next year? Maybe artificial intelligence will keep up its momentum, or perhaps interest in weight loss-focused pharmaceutical companies will increase. Whatever the answer is, it probably won't be dividend investing. This well-established investment style can hardly compete with newer trends in terms of pure excitement. However, investing in strong dividend stocks remains an excellent way to beat the market over the long run.
Let's consider two income-focused corporations whose shares are worth holding on to well beyond next year: AbbVie (ABBV -0.66%) and Abbott Laboratories (ABT -0.24%).
1. AbbVie
AbbVie, a former division of Abbott Laboratories, became a stand-alone company in 2013. The drugmaker has undergone significant changes since, especially recently with the loss of patent exclusivity last year for its most important drug, Humira, and a new chief executive officer taking over. How is AbbVie handling these changes? Pretty well. The company's top line started moving in the right direction again this year. In the third quarter, AbbVie's revenue rose by 3.8% year over year to $14.5 billion.
Humira hit $21.2 billion in annual sales at its peak in 2022. It will generate less than half that this year, so it is impressive that AbbVie's revenue can grow less than two years after its top seller lost patent protection. The company has faced other challenges, though. Last month, AbbVie's shares dropped significantly after it announced disappointing results from a pair of phase 2 clinical trials for emraclidine, a potential treatment for schizophrenia it got its hands on through the $8.7 billion acquisition of Cerevel Therapeutics.
Emraclidine could have become a key growth driver for AbbVie, but that plan is probably out the window now. Considering the amount of money the drugmaker spent on this deal, the market's reaction is somewhat understandable. However, it's worth pointing out that AbbVie faced a surprisingly similar situation in 2018 and managed to bounce back. The company's existing lineup is managing to fill Humira's shoes just fine, largely thanks to Skyrizi and Rinvoq, two immunology medicines whose indications overlap with those of Humira.
AbbVie also has a deep pipeline with several dozen products in development. The company has the means to expand it further through more acquisitions if need be. So, the pharmaceutical giant's prospects remain attractive, especially once we consider the dividend, which yield 3.7%. AbbVie has increased its payouts every year since splitting from Abbott and is now a Dividend King, with 52 consecutive years of dividend increases. AbbVie shouldn't end this streak anytime soon, which makes it a top income stock to buy and hold for a long time.
2. Abbott Laboratories
Abbott Laboratories is a healthcare leader that operates across several businesses, including medical devices, pharmaceuticals, nutrition, and diagnostics. Though its medical device segment is generally its biggest growth driver, the company's diversification is a significant strength. During the past two years, Abbott's nutrition business has encountered legal and regulatory challenges that hurt sales. Revenue from coronavirus diagnostic kits also hasn't been as impressive as it once was.
Despite these issues, Abbott Laboratories' sales have generally moved in the right direction. The company's third-quarter revenue was $10.6 billion, up 4.9% from the year-ago period. Abbott Laboratories routinely develops and markets new devices or adds additional indications to existing ones. The company's biggest growth driver, though, is its diabetes care segment. Abbott Laboratories' franchise of continuous glucose monitoring (CGM) systems, the FreeStyle Libre, has gained significant traction in recent years.
There is more where that came from since, as Abbott pointed out earlier this year, only 1% of the world's half-billion diabetic adults use CGM technology. There is plenty of growth fuel here and elsewhere for the medical device giant. Products such as the TriClip, which helps repair patients' heart valves non-invasively, and the Amplatzer Amulet, a device to treat another heart-related condition, are also contributing. Abbott Laboratories' innovative qualities and deep industry expertise have worked wonders for the company before. The healthcare giant can still deliver the results and performance it has in the past.
Abbott should also maintain its dividend, which yield about 2.1%. The company has been increasing payouts for 52 consecutive years. Thus, the stock is a strong pick for long-term dividend investors.
