Is AbbVie the Best Dividend King to Buy in September?

Dividend Kings are arguably among the best income stocks on the planet. These are corporations that have raised their payouts for at least 50 consecutive years. However, members of this elite group aren't all created equal. Some, like Hormel Foods (NYSE: HRL), are going through challenging periods, while others, such as Johnson & Johnson (NYSE: JNJ), are posting solid financial results. AbbVie (NYSE: ABBV), a pharmaceutical giant, is a popular member of this group with a lot going for it. Is this drugmaker the best Dividend King to buy this month? Let's find out.

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The case for AbbVie

AbbVie is a Dividend King by virtue of its legacy as a former division of Abbott Laboratories (NYSE: ABT). Including the time AbbVie spent under the wing of its former parent company, it has increased its payouts for 54 consecutive years. But AbbVie has been impressive in its own right since splitting from Abbott in 2013. AbbVie has grown its dividends at rates similar to Abbott since 2013 and has delivered much better returns over this period.

ABBV Total Return Level data by YCharts

True, AbbVie has now lost the asset that powered consistent revenue and earnings growth for much of the time it has been a publicly traded, stand-alone corporation: Humira. This immunology medicine lost patent exclusivity in the U.S. in 2023. Still, AbbVie quickly returned to revenue and earnings growth after that massive patent cliff. This highlights the company's ability to overcome one of the biggest risks in the pharmaceutical industry. AbbVie did so through a combination of shrewd acquisitions, licensing deals, and internal development of novel medicines.

The company's biggest deal was the $63 billion acquisition of Allergan, which granted it access to several key products, including the Botox franchise. Meanwhile, AbbVie licensed Skyrizi while developing Rinvoq in-house. These two immunology products are now its biggest growth drivers. They will likely lose patent exclusivity sometime in the next decade, but AbbVie has plenty of time before that. In fact, the company should experience no significant loss of patent exclusivity until the end of the current decade, according to management.

Further, AbbVie has started crafting a plan to develop newer drugs that will replace Skyrizi and Rinvoq. Acquired products, such as Zumilokibart -- a promising investigational medicine for eczema -- could meaningfully contribute down the line if they succeed in phase 3 studies. AbbVie also has promising licensed products, such as ABBV-295, a potential long-acting weight-loss candidate, as well as exciting internally developed candidates, such as ABBV-706, an investigational cancer drug. Over the long term, investors should expect consistent financial results from AbbVie, and even when patent cliffs disrupt that, the drugmaker has the tools to overcome them. AbbVie should also maintain healthy dividend growth.

The best Dividend King?

Picking "the best" anything on equity markets is always complicated. Different investors have varying preferences, goals, starting capital, investment horizons, and risk tolerances that could guide them toward different but equally valid investment decisions. AbbVie looks like a great dividend stock, but some investors avoid the pharmaceutical industry altogether due to the combination of strict regulatory oversight and the dreaded patent cliffs. For these people, a drugmaker like AbbVie is out of the question, regardless of how well it is performing right now. Are these investors "wrong"?

Not really, they just have different preferences. Similarly, others will avoid the retail industry due to its relatively low barrier to entry and razor-thin profit margins. An otherwise rock-solid business like Walmart (NASDAQ: WMT) won't even be an option for them. And again, there is nothing wrong with that. Here's the lesson. There is no such thing as "the best" Dividend King to buy in September, or in any other month. However, AbbVie is an excellent pick for some investors due to its strong recent financial performance, an impressive track record of innovation, a demonstrated ability to overcome patent cliffs, and a portfolio of products that remains in high demand regardless of economic conditions.

Prosper Junior Bakiny has positions in Johnson & Johnson and Walmart. The Motley Fool has positions in and recommends AbbVie, Abbott Laboratories, and Walmart. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.