3 Supercharged Dividend Stocks to Buy in the Stock Market Sell-Off

Stock market crashes and corrections happen. Since the beginning of the year, the S&P 500 has been down over 17%. In fact, since the end of World War II, the benchmark index has tumbled more than 10% around 30 separate times. 

A bear market of at least a 20% decline will also eventually happen again, maybe even this month. Soaring inflation, stubborn supply-chain problems, and a Federal Reserve determined to raise interest rates to combat runaway price increases make the likelihood all the greater.

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St. Louis Fed president James Bullard said it’s a “fantasy” to believe the worst inflation the U.S. has experienced in 40 years could be tamed by tiptoeing around it. He indicated a need for aggressive interest rate hikes to the point where economic growth stops, and perhaps even contracts. 

But even if a bear market did happen, it’s important to keep such downturns in perspective. The Schwab Center for Financial Research says the average bear market has lasted only about 17 months.

That suggests investors should not cower in the face of a decline, but rather be ready to spring into action. The following three supercharged dividend stocks are good bets to carry you through the low points of any correction and beyond.

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AbbVie

Pharmaceutical giant AbbVie (ABBV -0.51%) still relies upon blockbuster anti-inflammatory drug Humira for the bulk of its revenue — $4.7 billion in the first quarter, or 35% of the total $13.5 billion generated — but the rise of biosimilars will eventually take its toll.

Internationally, Humira revenue tumbled 22% in the quarter to $743 million because of the new competition, and they’ll begin showing up in the U.S. next year when Humira goes off-patent. But the cliff isn’t nearly as steep as once thought. Humira has multiple indications it’s approved for in the U.S. and abroad, so it will still be a massively growing therapy for years to come despite the presence of biosimilars.

And AbbVie has other big drugs that are growing too. Skyrizi revenue was almost $1 billion in the first quarter, a 66% increase , and it accounts for 23% of the total prescription share in the U.S. biologic market. Meanwhile, rheumatoid arthritis therapy Rinvoq saw revenue jump 57% to almost $500 million. AbbVie’s neuroscience portfolio also contributed some $1.5 billion in revenue (up 20%) and its aesthetics portfolio brought in another $1.4 billion (up 22.5%).

AbbVie is a solid growth business and pays a dividend yielding 3.7% annually. From its beginning in 2013 as a spinoff from Abbott Labs, AbbVie has increased its dividend by more than 250% and raised it every year. Inheriting the dividend history of Abbott, it’s also considered a Dividend Aristocrat. 

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Pfizer

Pfizer (PFE -0.93%) is another pharmaceutical giant that, after the start of the pandemic, became all about its COVID-19 vaccines. Comirnaty, the vaccine it developed with BioNTech, generated $13.2 billion in first-quarter sales as global uptake in pediatric and booster shots rose. This represents 89% of Pfizer’s vaccine portfolio as well as 51% of total revenue. With the pharma company now seeking approval for booster shots for 5- to 11-year-olds, this niche still has plenty of legs for more growth.

Paxlovid, Pfizer’s oral COVID treatment, also gained considerable ground, growing 72% year over year, despite unfavorable currency exchange rates. It brought in almost $1.5 billion in sales, and it is expected to contribute $22 billion for the full year based on signed supply contracts signed so far this year. 

With Comirnaty forecast to bring in $32 billion in full-year sales, the two treatments will represent between 53% and 55% of full-year revenue. The rest of its Covid-related portfolio boosts that to about 60% of the total, which does raise the specter of Pfizer being too dependent on COVID-19 products.

That’s certainly the case at the moment. But with more than two-dozen phase 3 trials ongoing, Pfizer has a better-than-average chance of finding more than a few winning treatments to bolster its business once the immediacy of the COVID-19 threat fades.

The shares are also trading at a significant discount of 11 times trailing earnings and 9 times next year’s estimates — as well as just 13 times free cash flow. With a dividend yielding 3.2% annually, it has made the payout since 1980 and has increased the dividend every year since 2009 (it had cut its dividend in half earlier that year when it was going to buy Wyeth).

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Walgreens Boots Alliance

Healthcare retailer Walgreens Boots Alliance (WBA 0.90%) is down 17% so far in 2022, but the coming recession shouldn’t be a major factor in whether the pharmacy’s stock goes up and down. Regardless of the economy, people get sick, maybe even more so in bad times. 

But Walgreens has been on a cost-cutting program that has wiped out $2 billion in expenses ahead of schedule, while its transformation plan is reportedly on track to deliver $3.3 billion in annual cost savings by fiscal 2024 (which starts in September of next year).

Although its second-quarter earnings hiccup caused investors to dump its stock, sales were still growing, operating income was rising, and its retail footprint saw record comparable sales with a nearly 15% gain. It’s also a solid dividend stock, with 46 consecutive years of increasing the payout, which puts it on track to be a Dividend King in a few years. And because its financial condition is solid and can easily cover its payout, that should not be a problem.

With the dividend yielding a generous 4.4% and its stock even cheaper than Pfizer at just six times trailing earnings and eight times estimates (its free cash flow multiple is slightly more elevated at almost 19), it’s a good pick for a growing dividend stock to settle into safely during market turmoil.