My Top Dividend King to Buy and Hold for the Next 10 Years, and It Isn't Even Close | The Motley Fool (2024)

Track records are important. That's true whether we're talking about sports teams, political candidates, surgeons, or dividend stocks.

The dividend stocks with the best track records of all are the group known as the Dividend Kings. These stocks have delivered at least 50 consecutive years of dividend increases.

But even within this elite club, some dividend stocks stand out above others. I think that there's one that's especially attractive right now. Here's my top Dividend King to buy and hold for the next 10 years (and it isn't even close).

The magnificent seven

I viewAbbVie (ABBV) as the king of the Dividend Kings. The drugmaker has increased its dividend for 51 consecutive years, including the time when it was part of Abbott Labs.

Yes, there are lots of other Dividend Kings with longer streaks of dividend hikes. However, one key thing that sets AbbVie apart from most of the pack is that it has increased its dividend by a jaw-dropping 270% over the last 10 years. Only one Dividend King has beaten that performance: Nordson grew its dividend by nearly 278% during the same period.

However, Nordson's dividend yield is a paltry 1.1%. That leads me to the next reason why AbbVie looks so great. Its dividend yield stands at nearly 3.9%. This yield puts AbbVie in what I call "the magnificent seven" -- the seven Dividend Kings with the highest yields.

Data source: Google Finance.

Process of elimination

The other six members of the magnificent seven offer higher yields than AbbVie. So why do I still think AbbVie is the best Dividend King? For one thing, none of those other stocks come close to matching AbbVie's huge dividend growth. However, there's more to my process of elimination to highlight AbbVie's other advantages.

Valuation is a paramount concern, in my view, especially with the S&P 500 looking expensive these days. AbbVie's shares trade at a very reasonable 13.8 times forward earnings, well below the S&P 500's forward price-to-earnings ratio of 19x.

Granted, three other members of the magnificent seven Dividend Kings claim even lower valuations than AbbVie. Altria is the cheapest with its shares trading at only 8.8 times forward earnings. Universal Corp.'s forward P/E ratio is 10.3. 3M stock trades at 12.2 times expected earnings. But I nonetheless like AbbVie better than all three of those stocks.

I ruled out Altria and Universal because they sell addictive products that cause major health problems. Some investors don't have any qualms about buying tobacco stocks, but I do after seeing people I know die too soon from cancer caused by smoking cigarettes. Aside from that, I also think that Altria's and Universal's cheap valuations are warranted because of their low growth prospects.

What about 3M? My main concern is that the company faces a boatload of lawsuits related to the manufacture of allegedly defective earplugs used by the U.S. military. Largely as a result of this litigation, 3M stock has performed dismally in recent years while AbbVie has delivered solid gains.

AbbVie for the win

Some might think I'm failing to factor in AbbVie's own challenges. The company's revenue and earnings are falling because its top-selling drug, Humira, now faces biosimilar competition in the U.S.

However, I'm confident that AbbVie will be able to bounce back in the not-too-distant future. It already has two successors to Humira on the market (Rinvoq and Skyrizi) that should generate greater peak sales together than Humira did. In addition, AbbVie has other products that are driving growth as well as a pipeline that doesn't get enough respect, in my opinion.

There are plenty of great Dividend Kings. But for investors looking for a high yield, tremendous dividend growth, an attractive valuation, and solid long-term growth prospects, AbbVie is the top Dividend King to buy and hold over the next 10 years.