When you’re investing to supplement your Social Security income in retirement, it makes more sense to invest in businesses that can operate consistently and pay for years and years, so you don’t have to worry about the management of your positions. . In this vein, rapid growth is less important than the ability to continue paying dividends whether the economy is doing well or badly.
But you’ll probably want to pick a few companies that pay a large enough dividend to make a sizable difference in your life given the amount of money you can invest, so low-yielding stocks might not be suitable. Let’s look at a pair of passive income stocks that have the stability and decent returns you’ll need to bolster your retirement benefits without too much risk.
Viatris (TRV -0.19%) makes a cornucopia of generic drugs like Zoloft, Xanax, Lipitor and Viagra. Because people need their drugs for many years, it generates relatively stable revenue over time, and in 2021 it brought in over $17.8 billion in revenue.
Additionally, it is constantly working to bring generic versions of drugs that are no longer on patent to market, and by 2026 it will likely have around nine new products in play. This should ensure that its revenue continues to grow to the end of the decade and beyond – and this will also pave the way for its dividend growth.
Right now, its forward dividend yield of 4.3% is quite attractive and its payout should continue to rise alongside its cash flow. Investors should also expect its share buyback program to continue, boosting their returns. But it’s important to recognize that Viatris is still a company finding its place in the world.
As it is originally a spin-off of Pfizerthe company is still realizing cost synergies and reducing layoffs due to separation, which could generate $1 billion in savings by 2023. Other than that, the current macroeconomic situation is doing Viatris a disservice, particularly in emerging markets, where its quarterly net sales fell 10% year-over-year in the second quarter.
Still, its recent growth woes and economic woes are unlikely to last forever, and both are contributing to its high dividend yield at the moment. So it’s time to buy for its passive income potential.
AbbVie (ABVV 0.40%) develops new drugs for applications in immunology, neurology, cancer and aesthetics, and it is also a stock dividend par excellence. From sales of its drugs, it generated nearly $56.2 billion in revenue last year, and from 2013 to 2021 its diluted and adjusted earnings per share (EPS) grew at a compound annual growth rate. 19%, which is pretty good.
Next year, the company plans to bring eight of its drugs to market while advancing many others through clinical trials and submitting a handful of data packages to regulators for review. And all of the above is more or less AbbVie’s long-term standard, so it’s a fairly stable business despite the ongoing need to develop new drugs and go through the process of expensive clinical trials.
Currently, its forward dividend yield is close to 4%. Dividend growth is a priority for management, and its payout has increased 120% over the past five years through annual increases. Moreover, its yield could soon increase even further, depending on what happens in 2023, when its arthritis drug Humira loses patent protection.
Given that Humira was responsible for more than $5.3 billion in the second quarter alone, losing some of its contribution to generic competition will hurt AbbVie’s stock price. This will be (temporarily) painful for shareholders, but it will also present an opportunity to buy shares at a higher yield and at a lower price than would otherwise be available.
Management expects the company to return to growth as newly marketed drugs come online by 2025 – and people who bought shares for the potential for passive income in 2022 and 2023 will be among them. the greatest beneficiaries. While there is a risk that revenue growth will take longer to return than management hopes, as long as AbbVie continues to manufacture new drugs – and it will – it will eventually recover.