In today’s economic climate, dividend stocks provide a compelling combination of steady income, growth potential, and downside protection, appealing to both conservative and growth-focused investors.
Therefore, income-seeking investors could consider dividend powerhouses such as AbbVie Inc. (ABBV), The Coca-Cola Company (KO), and AT&T Inc. (T), which have stable cash flows and dividend yields of over 3%.
The Federal Reserve's 25-basis-point interest rate cut could make dividend stocks more appealing. Lower rates reduce the attractiveness of bonds, prompting investors to seek higher returns from dividends. With inflation still a concern, dividend stocks from established companies offer a stable income stream, helping investors offset inflationary pressures.
Hence, dividend stocks can offer stability and diversification in a portfolio. Furthermore, with geopolitical and economic uncertainties, dividend-paying stocks can serve as a safe investment option. Considering these favorable trends, let’s analyze the fundamental aspects of the three dividend picks.
AbbVie Inc. (ABBV)
ABBV discovers, develops, manufactures, and sells pharmaceuticals worldwide. It offers a diverse range of pharmaceutical products, including treatments for autoimmune diseases, dermatology, rheumatology, oncology, neuroscience, eye care, gastroenterology, and endocrinology. Some of the products in its portfolio are HUMIRA, SKYRIZI, and RINVOQ.
In terms of the trailing-12-month EBIT margin, ABBV’s 31.10% is considerably higher than the 2.60% industry average. Likewise, its 31.94% trailing-12-month levered FCF margin is significantly higher than the 1.87% industry average. Its 70.33% trailing-12-month gross profit margin is 20.6% higher than the 58.33% industry average.
ABBV’s annualized dividend of $6.56 per share translates to a dividend yield of 3.85% on the current share price. Its four-year average yield is 3.93%. Its dividend payouts have increased at a CAGR of 6% over the past three years. Also, ABBV has paid dividends for 11 consecutive years.
ABBV’s net revenues for the fiscal third quarter, which ended on September 30, 2024, increased 3.8% year-over-year to $14.46 billion. Its operating earnings were $3.83 billion, reflecting a 68% growth over the prior-year quarter, and its adjusted earnings were $5.33 billion, up marginally year-over-year. Additionally, its adjusted EPS rose 1.7% from the year-ago value to $3.
Street expects ABBV’s EPS for the quarter ending December 31, 2024, to increase 6.7% year-over-year to $2.98. Its revenue for the same quarter is expected to grow 3.5% year-over-year to $14.81 billion. Over the past year, ABBV’s stock has gained 22.9% to close the last trading session at $170.46.
ABBV’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #3 out of 157 stocks in the Medical – Pharmaceuticals industry. It has a B grade for Growth, Value, Stability, Sentiment, and Quality. Beyond what we have stated above, we have also rated ABBV for Momentum. Get all the ratings of ABBV here.
The Coca-Cola Company (KO)
KO manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, sparkling flavors, water, sports, coffee, tea, juice, value-added dairy, plant-based beverages, and other beverages.
In terms of the trailing-12-month Return on Total Assets, KO’s 9.80% is 144.1% higher than the 4.01% industry average. Its 31.99% trailing-12-month EBITDA margin is 150.9% higher than the 12.75% industry average. Also, its 22.45% trailing-12-month net income margin is 422.6% higher than the 4.30% industry average.
KO has paid dividends for 61 consecutive years. Its annual dividend is $1.94, which translates to a yield of 3.08% at the current share price. Its four-year average dividend yield is 2.96%. Moreover, the company’s dividend payouts have increased at a CAGR of 4.7% over the past three years.
KO’s non-GAAP net operating revenues for the third quarter ended September 27, 2024, grew 3.2% year-over-year to $11.95 billion. Similarly, its non-GAAP operating income was $3.67 billion, up 3.8% year-over-year. The company’s non-GAAP net income amounted to $3.35 billion, a 4.4% increase from the previous year. Additionally, the company’s non-GAAP EPS grew 4.1% year-over-year to $0.77.
Analysts expect KO’s EPS for the quarter ending December 31, 2024, to increase 6% year-over-year to $0.52. Its revenue for the quarter ending March 31, 2025, is expected to increase 2% year-over-year to $11.46 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 9.9% to close the last trading session at $62.52.
KO’s POWR Ratings reflect its mixed prospects. KO is ranked #18 out of 32 stocks in the B-rated Beverages industry. It has a B grade for Stability, Sentiment, and Quality. Click here to access the additional ratings for KO’s Growth, Value, and Momentum.
AT&T Inc. (T)
T provides telecommunications and technology services worldwide. The company operates through two segments: Communications and Latin America. It operates in the Communications segment and the Latin America segment.
On September 27, 2024, T announced a quarterly dividend of $0.2775 per share on common stock, and dividends on Series A and C preferred shares, all payable on November 1, 2024.
On September 9, 2024, T announced plans to expand its high-speed fiber internet through new partnerships with commercial open-access providers, aiming to reach more U.S. households. This includes expanding the Gigapower fiber footprint in collaboration with BlackRock.
In terms of the trailing-12-month gross profit margin, T’s 59.91% is 15.1% higher than the 52.06% industry average. Its 5.88% trailing-12-month Return on Total Capital is 57.3% higher than the 3.74% industry average. Also, its 14.76% trailing-12-month Capex / Sales is 306.9% higher than the 3.63% industry average.
T pays an annual dividend of $1.11, which translates to a yield of 4.98% at the current share price. Its four-year average dividend yield is 6.35%. T has paid dividends for the past 28 years.
In the third quarter ended September 30, 2024, T’s operating revenues were $30.21 billion, and its adjusted operating income was $6.51 billion. During the same period, the company’s adjusted EBITDA rose 3.4% year-over-year to $11.59 billion. Moreover, its net income was $145 million, and adjusted EPS was $0.60.
For the quarter ending March 31, 2025, T’s EPS and revenue are expected to increase 2.9% and 1.4% year-over-year to $0.57 and $30.45 billion, respectively. Over the past year, the stock has gained 43.3% to close the last trading session at $22.33.
T’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth. Within the Telecom - Domestic industry, it is ranked #6 out of 20 stocks. To see T’s Value, Momentum, Stability, Sentiment, and Quality ratings, click here.
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ABBV shares were trading at $169.63 per share on Thursday afternoon, down $0.72 (-0.42%). Year-to-date, ABBV has gained 13.46%, versus a 26.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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