2 Unstoppable Dividend Stocks to Buy in a Stock Market Selloff

There are many excellent reasons to invest in dividend stocks, including the fact that only solid companies can afford to keep their payouts growing over the long term. When you invest your money in corporations that have been paying dividends for a long time, you can invest in relatively safe and solid companies.

However, while dividend stocks can be great to buy, they are even better when you can buy them at a discount. And there is no better time to do so than when the market is down. Let’s take a look at two attractive dividend stocks that would become even more attractive in a bear market: Abbott Laboratories (NYSE: ABT) AND Gilead Science (NASDAQ: GILD).

1. Abbott Laboratories

Medical device specialist Abbott Laboratories is a unique dividend stock. The healthcare giant has raised its payout for 52 consecutive years, a rare feat that has earned it a place in the exclusive group of Dividend Kings. Abbott’s future yield, currently 2.1%, isn’t quite as high — but it’s still better than S&P500The current average is 1.3%.

However, Abbott stock looks quite expensive. Its price-to-earnings (P/E) ratio is 22.6 at the time of writing, which is higher than the healthcare industry average of 19.2. While even at these levels, Abbott stock could be a buy, a bear market could create a better entry point for income investors interested in the stock. The company’s P/E is not significantly higher than the average for its sector, and its business remains attractive.

Abbott Laboratories sells a wide range of medical devices in therapeutic areas, from structural heart products to diabetes care. The company’s other segments—nutrition, proven pharmaceuticals, and diagnostics—make the business diversified. Although medical devices is its most important unit, Abbott does not rely solely on its operations to drive growth. The corporation also has a large global presence.

Although the pandemic disrupted operations, Abbott’s revenue and earnings generally trended in the right direction. In the second quarter, top line of $10.4 billion was up 4% year over year; excluding sales of COVID-19 diagnostic tests, sales were up 9% year over year on an organic basis. Adjusted earnings per share (EPS) of $1.14 were up 5.6% from the same period a year earlier.

In addition, the company has several important long-term growth drivers. None is more important than its FreeStyle Libre franchise, a collection of continuous glucose monitoring (CGM) devices that help diabetes patients track their blood glucose levels. In the second quarter, FreeStyle Libre sales rose 18.4% year over year (more than four times the growth of Abbott’s total sales) to $1.6 billion. Abbott still sees significant growth potential in FreeStyle Libre, because it says only a small fraction of the “half a billion” adults worldwide with diabetes have access to CGM technology.

In short, Abbott’s core business is solid and diversified, and it offers key growth opportunities. This should allow the company to continue rewarding shareholders with dividend increases for a long time to come. While it’s worth waiting for a better entry point before buying the stock — especially since its current earnings growth barely justifies its valuation — getting in now wouldn’t be a bad move.

2. Gilead Sciences

Gilead Sciences has faced a number of headwinds in recent years, including pandemic-related business disruptions (like many other companies) and the lack of regulatory approval for drugs that looked incredibly promising. Despite this, the company’s valuation remains quite high, with a forward P/E ratio now above 21.

Gilead Sciences’ financial results haven’t been particularly impressive lately. In the first quarter, the company’s revenue rose 5% year over year — 6% excluding the coronavirus antibody — to $6.7 billion. The company reported an adjusted loss per share of $1.32, compared with adjusted earnings per share of $1.37 in the year-ago quarter.

In fairness, the net loss was due to acquisition-related charges. That’s not something that’s likely to plague Gilead Sciences’ business every quarter. What’s more, there’s solid reason to expect the company to eventually bounce back.

Gilead Sciences is the global leader in HIV medicines with Biktarvy, the world’s best-selling HIV medicine. Last year, Biktarvy was the world’s fifth-best-selling medicine, with revenues of $11.8 billion, and the medicine is still growing: first-quarter sales rose 10% year over year to $2.9 billion.

The company has long been a leader in this space, and its pipeline includes a number of other potential HIV drugs. In the meantime, the company is venturing further into other areas. For example, while still small, its oncology unit is making solid progress. In the first quarter, oncology sales rose 18% year over year to $789 million. Given the breadth of its current pipeline and its impeccable track record, Gilead has the tools to add to its offerings in HIV, oncology and several other therapeutic areas.

The drugmaker has what it takes to sustain its dividend payments; it has increased its payout by more than 22% over the past five years. And it currently offers a forward yield of close to 4%. Gilead Sciences would be a great dividend stock to buy on a dip.

Is it worth investing $1,000 in Abbott Laboratories now?

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Gilead Sciences. The Motley Fool has a disclosure policy.

2 Unstoppable Dividend Stocks to Buy in a Stock Market Selloff was originally published by The Motley Fool