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3 Dividend Stocks for Value Investors Seeking Regular Income

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·5 min read
In this article:
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  • 3M Company (MMM): This dividend stock has been paying dividends to its shareholders for more than 100 years.

  • AbbVie (ABBV): AbbVie has doubled its dividend over a span of seven years, after its spin-off from Abbot Laboratories.

  • Johnson & Johnson (JNJ): The firm has raised its dividend for 60 consecutive years.

Source: Shutterstock

Dividend stocks give value investors a regular source of income. And in the current high-inflation environment, investing in dividend aristocrats is considered a safe bet as they provide hedge against rising inflation.

In March 2022, the United States authorities reported an annual inflation rate of 8.5%. This is highest in the last 40 years.

Also given low bond yields, investing in dividend stocks is prudent as returns would be higher. Investors should be cautious in selecting these stocks.

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Below are three companies that have been distributing dividends for more than 50 years. These companies have sustained their dividends, even during unfavorable economic conditions. I have selected these stocks after considering their track record of steady performance, as well as their future growth prospects.

From the valuation perspective, these dividend stocks are currently trading at discounts compared to their peer group average, making them an attractive investment proposition.

MMM

3M Company

$146.73

ABBV

AbbVie

$154.25

JNJ

Johnson & Johnson

$183.88

3M Company (MMM)

3M (MMM) building with logo and words on the side reading "Curiosity is just the beginning."
3M (MMM) building with logo and words on the side reading "Curiosity is just the beginning."

Source: Ken Wolter / Shutterstock.com

3M Company (NYSE:MMM) has paid dividends to its shareholders without interruption for more than 100 years. The company has steadily increased its annual dividend for 64 consecutive years.

The dividend payout has increased at an annualized rate of around 10% over the past decade. The company has a dividend yield of 4%, higher than the 30-day SEC yield of 1.4% of the Vanguard Industrial Index ETF (NYSEARCA:VIS).

3M is a diversified technology company that manufactures and marketer of variety of products used in daily life. Over the last five years, the company has grown at a stable rate of 3.3%.

In 2021, its revenues increase 9.9% primarily led by an 8.8% growth in organic sales and a 1.6% favorable impact from currency translations.

Going forward, management estimates organic sales to grow in the range of 2% to 5%. Earnings per share (EPS) are expected in the range of $10.15 to $10.65. Free cash flow (FCF) is likely to be between $5.3 billion and $6.2 billion.

Although the estimates can be impacted by supply chain disruptions, the company has adequate cashflows to sustain its dividends and capex plans.

AbbVie (ABBV)

ABBV Stock: Offering Oil Yield Without Oil's Risk
ABBV Stock: Offering Oil Yield Without Oil's Risk

Source: Piotr Swat / Shutterstock.com

AbbVie (NYSE:ABBV) was formed in 2013 from the spinoff of Abbott Laboratories (NYSE:ABT). The company is a biopharmaceutical firm that discovers, develops, manufactures, and sells its products globally.

The company is known for its drug Humira, an immunology medication with several uses.

Over the last five years, ABBV has grown at an impressive compounded annual rate of 17%. However, this drug is expected to lose its patent in 2022.

Regulatory approval of its Rinvoq drug (used in treating patients with moderate to severe ulcerative colitis) should keep the growth momentum going. The drug is likely to generate more than $400 million in annual sales.

Further, the company expects to achieve over $2 billion worth of synergy from its acquisition of Allergan to develop new aesthetics business.

In 2022, the board raised its dividend by 8.5% in 2022 to $1.41 a share. Counting its time as part of ABT, the company has raised dividends for over 50 years.

Overall, AbbVie has raised its dividend 250% after its spin-off and maintained a pay-out ratio of 88%. It has a dividend yield of 3.6%.

For 2022, management anticipates adjusted earnings of $14-$14.20 per share, up by 10% year-over-year.

Free cash flow is expected to be $24 billion, which it will utilized in paying debts, investing in its robust pipeline of products and support its dividend.

Johnson & Johnson (JNJ)

Negative Press Presents a Buying Opportunity with JNJ Stock
Negative Press Presents a Buying Opportunity with JNJ Stock

Source: Sundry Photography / Shutterstock.com

The last of our dividend stocks, Johnson & Johnson (NYSE:JNJ), is a healthcare provider in the United States. The firm researches and develops, manufactures and sells various products in categories like consumer health, pharmaceuticals, and medical devices.

The company’s greatest strengths lie in its size and diversity of revenue streams. Over the last five years, JNJ has recorded a compounded annual revenue growth rate of 5.6%.

In the first quarter of 2022, the company reported revenues of $23.4 billion, up 5% year-over-year, led by strength in all its segments on an operational basis (excluding the impact of currency). Earnings of $2.67 per share overshadowed consensus estimates by 7 cents per share.

The board has raised its dividend for 60 consecutive years, including a 6.6% increase in Q1 2022 to $1.13 per share. At present, this provides a yield of about 2.5%, and maintains a payout ratio of 57%.

However, management lowered its FY 2022 guidance due to a slower demand for Covid-19 vaccine.

Excluding revenues from the Covid-19 vaccine, the company is expected to generate revenues in the range of $94.8 billion to $95.8 billion, down from its previously estimation of $95.9 billion to $96.9 billion. Organic sales are likely to grow in the range of 6.5%-7.5%.

Adjusted earnings per share is now forecasted in the range of $10.15-$10.35, down from $10.40-$10.60 per share guided previously.

On the date of publication, Sakshi Agarwalla did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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