3 Dividend Stocks You Should Buy Without Hesitation in September

Ownership has its perks — at least for many stocks. More than 5,000 stocks traded on U.S. exchanges return a portion of their earnings to shareholders in the form of dividends. Not all of them are great buys right now, but some are.

Three Fool.com contributors were asked to recommend some obvious dividend stocks to buy in September. They chose companies in the health care industry AbbVie (ABBV 0.28%), Merck (MRK) -0.63%)AND Pfizer (PFE 0.17%)Here’s why.

Dividend royalties with solid growth prospects

Keith Speights (AbbVie): You can count the number of Dividend Kings in healthcare on one hand and still have a thumb left. AbbVie is one of four. The big pharma company has increased its dividend every year for 52 consecutive years.

While some Dividend Kings offer paltry dividend yields, that’s not the case for AbbVie. The drugmaker’s forward dividend yield is 3.2%, and that’s lower than it’s been in the past for good reason: AbbVie’s stock price is up more than 20% this year.

This strong share price reflects AbbVie’s solid growth prospects. Of course, Humira sales continue to decline due to competition from biosimilars. However, AbbVie has prepared well for the loss of patent exclusivity on its best-selling drug.

Humira’s two successors, Rinvoq and Skyrizi, are on track to jointly exceed Humira’s peak annual sales in the next few years. AbbVie’s acquisition of Allergan in 2020 added key growth drivers to its pipeline, including migraine therapies Qulipta and Ubrelvy and antipsychotic drug Vraylar.

Additionally, AbbVie has more than 90 programs in clinical development. The pipeline includes more than 50 programs that are in mid- or late-stage testing.

AbbVie expects to achieve high single-digit growth by the end of the decade. With this level of growth, combined with a steadily increasing dividend, the stock should reward investors with attractive total returns for a long time.

Look beyond the rapidly approaching patent divide

Prosper Junior Bakiny (Merck): Despite being one of the world’s largest pharmaceutical companies with a vast portfolio of drugs — not to mention one of the world’s leading animal health companies — Merck’s name is strongly associated with its cancer drug, Keytruda. The company’s crown jewel is the world’s best-selling drug, a title it officially received last year.

However, Keytruda is set to lose its patent in 2028. Some investors fear this patent gulf will threaten Merck’s business and dividend.

And what a business it is. Merck’s revenues and profits continue to grow at a healthy pace. Merck’s second-quarter revenues rose 7% year over year—a respectable performance for a pharmaceutical giant—to $16.1 billion. Earnings per share of $2.14 were a significant improvement over the $2.35 net loss per share reported in the same period a year earlier. The net loss last year was related to acquisition costs at the time.

Merck’s dividend has risen 75% over the past decade; it offers a forward yield of 2.64%. Merck should survive the loss of Keytruda’s patent exclusivity, fortunately. It is developing a subcutaneous version of the drug that seems destined to be a blockbuster and take on many of Keytruda’s indications. Research firm Evaluate Pharma estimates that this new version of Keytruda will generate as much as $8 billion in revenue by 2030.

The company has several other products that are doing well and a strong pipeline of drugs, some of which should get approval in the next few years. Merck offers products that people need regardless of economic conditions, has an impressive track record, and can develop entirely new drugs through innovation. The company is a great money stock to buy and hold.

Pfizer is a highly profitable company with many growth prospects

David Jagielski (Pfizer): One dividend stock I wouldn’t hesitate to buy right now is Pfizer. At around 6%, this company pays investors a high rate of return that is more than four times higher than S&P500 The company has also been steadily increasing its payouts since 2010, with the increases being small, but Pfizer’s dividend is up 17% over five years.

Investors may be concerned about the dividend because of the challenges Pfizer faces. The company is looking to move into new growth opportunities as it faces the loss of patent protection on a number of key drugs. Revenue related to COVID-19 is also declining. But thanks to the company’s acquisition push, including its $43 billion purchase of oncology company Seagen last year, Pfizer may be in better shape than investors fear.

It is investing in new product launches and expects to not only offset the revenue declines caused by patent losses by the end of the decade, but the net effect should be to increase revenues. Pfizer projects it will lose $18 billion in revenue by the end of the decade due to generic drugs and increasing competition, but aims to add $25 billion through acquisitions and new products by then.

Investors have little confidence in Pfizer stock (it’s down more than 20% in the past 12 months), but if you’re willing to be patient as the company goes through tough times in the coming years, the rewards could be significant. Not only can you secure a great profit now, but as the drugmaker launches new products, the stock price could start to rise.