3 No-Dividend Stocks to Buy in September

Ownership has its perks — at least with many shares. More than 5,000 stocks traded on US exchanges return a portion of their profits to shareholders in the form of dividends. Not all of them are great picks to buy now, but some are.

Three Fool.com contributors were asked to recommend some no-brainer dividend stocks to buy in September. They selected healthcare companies AbbVie (ABBV 0.28%), Merck (MRK -0.63%)and Pfizer (PFE 0.17%). Here’s why.

Dividend royalty with solid growth prospects

Keith Speights (AbbVie): You can count the number of dividend kings operating in the healthcare sector on one hand and still have a thumb. AbbVie is one of the four. The pharmaceutical giant has increased its annual dividend for 52 consecutive years.

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

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

Humira’s two successors, Rinvoq and Skyrizi, are on track to together surpass Humira’s peak annual sales over the next several years. AbbVie’s 2020 acquisition of Allergan added to its lineup of key growth drivers, including migraine therapies Qulipta and Ubrelvy and antipsychotic drug Vraylar.

In addition, AbbVie’s pipeline offers more than 90 programs in clinical development. The list includes more than 50 programs that are in mid- or late-stage testing.

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

Look beyond the rapidly approaching patent cliff

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

However, Keytruda will be off patent in 2028. Some investors fear that this patent cliff will threaten Merck’s business and dividends.

And what a deal it is. Merck’s revenue and earnings continue to grow at a healthy level. In the second quarter, Merck’s top line rose 7 percent year over year — a decent performance for a pharmaceutical giant — to $16.1 billion. Its earnings per share of $2.14 were much better than the net loss of $2.35 per share reported in the year-ago period. Last year’s net loss was related to acquisition costs at the time.

Merck’s dividend has risen 75% over the past decade; offers a forward yield of 2.64%. Fortunately, Merck should survive Keytruda’s loss of patent exclusivity. A subcutaneous version of the drug is in development that looks set to be a blockbuster and take over many of Keytruda’s indications. Research firm Evaluate Pharma estimates that this new version of Keytruda will generate up to $8 billion in revenue by 2030.

The company has several other products that are performing well and a rich pipeline of drugs, some of which should win approval in the next few years. Merck provides products that people need regardless of economic conditions, has an impressive track record and can develop new medicines through innovation. The company is a great welcome to buy and own.

Pfizer is a high yielding stock with many upsides

David Jagielski (Pfizer): One dividend stock I wouldn’t hesitate to buy now is Pfizer. At around 6%, it pays investors a high yield that is more than four times that S&P 500 average of 1.3%. The company has also steadily increased its payout since 2010. While these increases weren’t large, Pfizer’s dividend still grew by 17% over five years.

Investors may be worried about the dividend because of the challenges ahead for Pfizer. The company is looking to transition to new growth opportunities as it faces the loss of patent protection for several key drugs. COVID-related revenue was also down. But thanks to the company’s pursuit of acquisitions, including the $43 billion purchase of oncology company Seagen last year, Pfizer may be in better shape than investors fear.

It has invested in new product launches and expects by the end of the decade to not only offset the decline in revenue due to patent losses, but the net effect should see it add to the top line. Pfizer estimates it will lose $18 billion in revenue by the end of the decade due to generic drugs and growing competition, but aims to add $25 billion by then through acquisitions and new products.

There hasn’t been much confidence in Pfizer stock from investors (it’s down more than 20% over the past 12 months), but if you’re willing to be patient with the company as it navigates what will surely be a challenging time in years to come ago, the gain could be significant. Not only can you get a big return right now, but as the pharmaceutical company comes out with new products, the stock price can start to rise.