3 Dividend Growth Stocks to Buy and Hold

Key Points

• Abbott Laboratories is a dividend growth machine that's known for consistency.

• AbbVie's dividend has more than quadrupled since 2013.

• Eli Lilly offers dividend growth and, more importantly, tremendous share price growth.

• 10 stocks we like better than AbbVie ›

What's better than a great dividend? A great dividend that's growing.

Three Motley Fool contributors think they've found ideal dividend growth stocks to buy and hold -- and all three are healthcare stocks. Here's why they picked Abbott Laboratories (NYSE: ABT), AbbVie (NYSE: ABBV), and Eli Lilly (NYSE: LLY).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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A dividend growth machine that's known for consistency

David Jagielski (Abbott Laboratories): If you're looking for a stable dividend growth stock to buy and hold, healthcare giant Abbott Laboratories is a name that should be near or at the top of your list. The company sells pharmaceuticals, medical products, nutritional products, and diagnostic tools. Its stock also offers a dividend yield of 1.7%, which is higher than the S&P 500 average of 1.2%.

The real payoff, however, comes from owning the stock for the long haul. Abbott is a Dividend King and has raised its dividend payment for 53 straight years. Its most recent bump up was in December, when it boosted its dividend by more than 7%. And those increases add up over time as Abbott's quarterly payout has doubled over the past decade. With more than 400 straight quarterly dividend payments under its belt, the company has established itself as one of the safest dividend stocks to own in the healthcare sector.

Abbott's business isn't flashy, but it has provided investors with a great deal of stability. This year, it forecast that its sales will grow organically at a rate between 7.5% and 8.5%.

The healthcare stock generated returns of approximately 42% over the past five years. When you include its dividend, the total gains from owning the stock grow to around 57%. For safety, long-term stability, and dividend growth, Abbott is a great investment to put into your portfolio and hang on to for years.

The kind of dividend growth that investors should love

Keith Speights (AbbVie): Abbott Labs spun off AbbVie as a separate entity in 2013. The new company inherited Abbott's impressive track record of dividend increases. But AbbVie kicked things up a notch. Since the spin-off, the big drugmaker has more than quadrupled its dividend payout. AbbVie's forward dividend yield currently stands at an impressive 3.37%.

Other kinds of growth, namely share price, revenue, and earnings growth, might seem to be a much greater challenge for AbbVie these days. The company lost U.S. patent exclusivity for Humira in early 2023. For years, Humira ranked as AbbVie's top-selling product by far.

However, the company prepared well for Humira's decline. AbbVie invested in developing new products. It made several acquisitions. As a result, the drugmaker's revenue and adjusted earnings are increasing despite the drag from Humira.

I expect AbbVie's growth will remain strong for years to come. The two successors to Humira -- Rinvoq and Skyrizi -- should together pull in revenue of around $24.7 billion this year. That's more than Humira made at its peak. And sales for the two newer autoimmune disease drugs continue to soar.

AbbVie's pipeline looks promising, too. The company has around 90 programs in clinical development, with more than half of them in mid- and late-stage clinical trials.

Dividend growth and just good old growth

Prosper Junior Bakiny (Eli Lilly): Over the past five years, Eli Lilly's dividends have increased by 102.7%. That's a terrific record that makes the stock attractive to dividend-growth seekers, especially when considering the rest of its operations. A dividend program is only as reliable as the company backing it, and Eli Lilly's business is about as solid as one can find in the pharmaceutical industry right now. Eli Lilly is a leader in the fast-growing weight loss market.

Recent developments arguably give the drugmaker the edge over its only worthy rival, Novo Nordisk (NYSE: NVO). For instance, Eli Lilly reported strong phase 3 results for orforglipron, an oral GLP-1 candidate. Considering the company's own Zepbound and Novo Nordisk's Wegovy are both administered via subcutaneous injection, orforglipron could grab a decent share of this market.

Furthermore, beyond weight loss and diabetes, Eli Lilly's two core therapeutic areas, the company has other highly promising approved products and candidates. We can name current blockbusters such as Verzenio or Taltz, which treat breast cancer and plaque psoriasis, respectively. Recent approvals, like Ebglyss for Eczema, should meaningfully contribute in the medium term.

Lastly, Eli Lilly has a pipeline full of additional candidates, some of which will eventually generate well over $1 billion in annual sales. Eli Lilly's revenue and earnings have been growing significantly faster than those of its similarly sized peers. That should continue for at least the next few years. In the meantime, the company should deliver dividend growth -- and stock price appreciation -- to those who stay the course. The stock is a no-brainer for income- and growth-oriented investors.

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David Jagielski has positions in Novo Nordisk. Keith Speights has positions in AbbVie. Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.