Some investors won't be attracted to high-yield dividend stocks. But if you're looking for income, they can be great additions to your portfolio.
Three Motley Fool contributors have identified some especially great high-yield dividend stocks to buy in 2025 -- and all of them are big pharma stocks. Here's why they chose AbbVie (ABBV -0.57%), Amgen (AMGN 0.82%), and Pfizer (PFE -1.00%).
A Dividend King with solid growth prospects
Keith Speights (AbbVie): Income investors should like AbbVie's forward dividend yield of 3.68%. However, they should absolutely love the big drugmaker's dividend track record. AbbVie has increased its dividend for 52 years, putting it in the elite group of stocks known as Dividend Kings.
For years, the big story for AbbVie focused on its blockbuster autoimmune disease drug Humira. Now, though, Humira's sales are falling as it faces biosimilar competition. The good news is that AbbVie has prepared well for this scenario.
Sales for the company's two successors to Humira -- Rinvoq and Skyrizi -- continue to soar. Other drugs in AbbVie's lineup are also delivering strong sales growth, including Botox, migraine therapies Qulipta and Ubrelvy, cancer drug Venclexta, antipsychotic medication Vrayalar. The company picked up several of these products through smart acquisitions.
AbbVie's pipeline features over 90 programs in clinical development. More than 50 of them are in either mid- or late-stage testing. A whopping 80% of them are compounds with a novel mechanism of action, which could bode well for their competitive positions if they eventually win regulatory approvals.
I expect AbbVie will continue to deliver solid growth throughout the second half of the decade and into the 2030s. Its stock is also reasonably priced relative to these growth prospects with a forward earnings multiple of 15.
Multiple reasons to buy the dip
Prosper Junior Bakiny (Amgen): The market had high hopes for Amgen’s investigational weight loss medicine, MariTide. That’s why the company’s shares dropped off a cliff after it announced positive, but not positive enough, phase 2 data for this product. The biotech’s shares haven’t recovered yet, but this setback does provide an entry point for patient investors. There are many reasons Amgen is still worth investing in. For one, MariTide could still go on to be a respectable weight loss drug, and Amgen is working on at least one other obesity candidate.
The company’s efforts in this fast-growing area are just getting underway.
Second, Amgen has other products that could be growth drivers for years to come. That includes asthma therapy Tezspire, the rights of which it shares with AstraZeneca, thyroid eye disease medicine Tepezza, and others. Third, Amgen’s pipeline still looks attractive. One area behind weight loss the company is targeting is the biosimilar market. It recently earned a legal win that allows it to launch a biosimilar version of Regeneron’s blockbuster medicine for wet age-related macular degeneration, Eylea, while the two drugmakers continue to fight a patent battle in the courtroom.
Amgen’s biosimilar ambition is targeting several more important brands, including Bristol Myers Squibb’s cancer drug, Opdivo. Amgen has many other candidates across multiple therapeutic areas.
Last but not least, the company is an excellent dividend pick. Amgen’s forward yield currently tops 3.6%, compared to the S&P 500’s average of 1.27%. Amgen has increased its payouts by 201.3% in the past decade. The company is an excellent high-yield stock, especially while its shares remain down.
Pfizer's dividend is safer than it looks
David Jagielski (Pfizer): A high-yielding stock that could make for a steal of a deal this year is Pfizer. The stock hasn't gotten much traction with investors recently, falling 8% last year as its results failed to drum up much bullishness.
But buying the stock while investor sentiment is low could be an advantageous position to take. That's because Pfizer's business is still doing well and its 6.5%-yielding dividend isn't in imminent danger. The company is focusing on trimming costs and improving its margins to help grow its profits. And for 2025, it expects its adjusted diluted earnings per share to increase slightly, up to a range of $2.85 to $3.00 (it expects between $2.75 to $2.95 for 2024).
The company pays a quarterly dividend of $0.43 ($1.72 over the course of a full year) and in its most recent earnings report, which ended on Sept. 29, 2024, its earnings per share topped $0.78. There has been a lot of noise on Pfizer's earnings results in the past year due to the volatility involving COVID revenue which pushed its payout ratio above 100%, but as things normalize, investors will see the dividend is safe and secure. Last year, CEO Albert Bourla referred to the dividend as a "sacred cow," emphasizing just how important the payout is for not just shareholders but to management as well.
It may be a tough road ahead for Pfizer as it finds new avenues to grow its business but with a growing pipeline and the acquisition of Seagen in 2023, there's plenty of reason to remain bullish on the stock in the long run. For dividend investors, now may be as good a time as any to add Pfizer to your portfolio.
