2 High-Yield Dividend Stocks to Buy in September and Hold for a Decade or More

Did you know that September is generally a bad month for the stock market? Individual investors and hedge fund managers tend to take the profits they made over the summer or sell any losers to reduce their taxable income.

In September, the Federal Reserve is expected to cut interest rates. Rate cuts tend to lift markets, but investors have been expecting this for over a year. In other words, there’s a good chance it’s going to be another disappointing September for the stocks you already own.

The price you pay is what determines the return you get on an investment. If prices fall in September, as expected, it could be an opportunity to get some high-yielding dividend stocks at a discount.

At recent prices, AbbVie (ABBV 0.58%) and AT&T (T 0.71%) offer returns that are more than double what you would get from the average stock in the benchmark S&P 500 index. Here’s why you want to pick them in September and keep them for the long haul.

AbbVie

AbbVie is a leading pharmaceutical company, with shares yielding 3.2% at recent prices and a long history of annual payout increases.

AbbVie has raised its quarterly payout every year since it spun off from Abbott Laboratories in 2013, and its parent’s dividend-raising history goes back even further. Abbott has increased his pay for 52 consecutive years.

AbbVie’s pace of dividend payout increases has been remarkable. It has increased its quarterly payout by 269% over the past decade and has room to announce bigger increases over the next few years. The company generated $17.8 billion in free cash flow over the past 12 months, but only used 61% of that amount to meet its dividend obligation.

AbbVie’s stock is under pressure as its former lead drug, an anti-inflammatory injection called Humira, loses its patent-protected market exclusivity in 2023. The stock looks like a smart buy as AbbVie’s investments with Humira profits could offset losses and could generate growth over the next decade.

For example, Rinvoq, a tablet for arthritis, and Skyrizi, an injection for psoriasis, are able to make up for Humira’s losses on their own. These two drugs both launched in 2019, but already generate $16.6 billion annually in combined sales.

Rinvoq and Skyrizi are hugely successful, but they’re not the only products that will boost AbbVie’s profits and, in turn, its dividend payouts. In the first half of 2024, the company’s migraine drugs Qulipta and Ubrelvy grew sales by 73% and 25% over the previous year. With plenty of relatively new growth-promoting drugs, investors can reasonably expect another decade of growing dividend payments from this stock.

AT&T

AT&T split its media assets in 2022, then cut its dividend accordingly and hasn’t raised it since. At recent prices, the stock offers a strong dividend yield of 5.6% plus a good chance to see significant dividend payout increases over the next decade.

Lengthening smartphone upgrade cycles have dampened equipment sales, but demand for broadband services is strong enough to offset the losses. Consumer broadband sales currently account for less than 10% of revenue, but are growing. New customers who switched to AT&T Fiber plus a new fixed wireless service for those not near a fiber line drove consumer broadband sales in the second quarter up 7% year-over-year.

In addition to the growing broadband operation, revenue from mobility services is increasing. With an industry-leading churn rate, second-quarter mobility services revenue grew 3.4% year-over-year.

AT&T expects $17 billion to $18 billion in free cash flow this year. It hasn’t announced a dividend increase yet, but it’s generating enough cash to pay off a large debt load and start raising its payout again sometime next year. Adding stocks to a portfolio now seems like a smart way to increase your passive income stream.