Stock market investors have plenty of reasons to celebrate as 2024 comes to a close. The S&P 500 index set multiple new record highs during the year, delivering a spectacular 25% return year to date amid a resilient economy and strong corporate earnings.
That being said, it’s always prudent to be prepared for the possibility of volatility as stocks tend to surprise the market in both directions. Questions regarding the path of inflation and uncertainty over how many more interest rate cuts the Federal Reserve will deliver in 2025 are just some of the risks investors will need to grapple with.
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One strategy to navigate this market environment is to take a more defensive approach, focusing on high-quality companies well positioned to continue delivering solid dividend income for shareholders.
Let’s explore two healthcare sector dividend stocks that could make a fantastic addition to your portfolio if there’s a stock market sell-off.
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1. AbbVie
AbbVie (NYSE: ABBV) is recognized as a global leader in biopharmaceuticals. The company’s portfolio spans multiple therapeutic areas, including its strong focus on immunology diseases alongside momentum in oncology and neuroscience.
Better-than-expected results this year have propelled the stock to a 12% gain thus far in 2024, with management projecting confidence in its outlook by recently hiking full-year earnings guidance.
What I like about AbbVie is the strong growth from its Skyrizi and Rinvoq autoimmune drugs covering conditions like psoriatic arthritis, Crohn’s disease, and rheumatoid arthritis through different mechanisms. They are both seen as improved successors to the blockbuster Humira, which lost its market exclusivity in 2023.
According to AbbVie, Skyrizi’s and Rinvoq’s combined sales are expected to climb above $27 billion annually by 2027, up from around $16 billion last year, with further upside over the next decade capturing expanded indications.
That’s important for investors thinking about the sustainability of AbbVie’s quarterly dividend of $1.64 per share, which yields 3.8% on a forward basis. Notably, the company has increased its annual payout for 53 consecutive years and shows every indication of maintaining this impressive streak. Overall, AbbVie is a great dividend growth stock that should continue to reward shareholders.
2. Pfizer
In contrast to AbbVie, Pfizer (NYSE: PFE) stands out as more of a turnaround opportunity, offering investors the chance to pick up shares in a pharmaceutical industry leader at a discount, down about 18% from its 52-week high.
Pfizer has struggled in recent years to move past the overhang of record COVID-19 vaccine and treatment sales and earnings in 2021 and 2022. The good news is that the company’s latest results highlight an improved outlook with several new growth drivers.
Drugs like Nurtec, which treats acute migraines in its primary care segment, and Xtandi as a treatment for prostate cancer in the oncology group have gained sales momentum through wider global adoption. Earnings are up sharply over the past year, with profitable growth expected to continue.
What I like about Pfizer is the company’s ability to innovate beyond its already extensive portfolio across numerous best-in-class drugs. It has six separate candidates currently in phase 3 clinical trials, with updated readouts in the next year as potential catalysts for the stock.
In the meantime, its shares provide investors with a 6.7% dividend yield on a forward basis, following a recent rate hike to the current $0.43 per share quarterly distribution. Whether Pfizer’s stock price surges higher now or later, investors are getting a compelling high yield to wait, backed by strong underlying free cash flow.
Final thoughts
The healthcare sector is a dependable corner of the stock market to weather potential storms. Regardless of how the economy evolves, people will always need medical products and services — a consistent demand further strengthened by an aging population whose chronic conditions are more prevalent.
While AbbVie and Pfizer each have different operating and financial profiles, both companies are entering 2025 with a strong outlook. Investors with a long-term time horizon seeking some more defensive exposure can find a place for shares of AbbVie and Pfizer within a diversified portfolio.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Pfizer. The Motley Fool has a disclosure policy.