3 Stocks Retirees Should Absolutely Love

Key Points

• Abbott Laboratories is a Dividend King with a great track record of consistency.

• You don't have to be retired to love AbbVie.

• Johnson & Johnson is a dream stock for those looking for reliability.

• 10 stocks we like better than AbbVie ›

Priorities change as you enter new seasons of life. That's especially true for your retirement years. And the changing priorities can include what you want from your investments. Income usually becomes much more important than growth when you stop receiving a paycheck.

With this in mind, three Motley Fool contributors have identified dividend stocks that they think retirees should absolutely love. Here's why they picked Abbott Laboratories (NYSE: ABT), AbbVie (NYSE: ABBV), and Johnson & Johnson (NYSE: JNJ).

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A Dividend King with a great track record of consistency

David Jagielski (Abbott Laboratories): If you're a retiree looking for a solid income-generating stock to buy and hold, Abbott Laboratories looks like one of the best options to consider today. Not only does it offer an above-average dividend that yields 1.9% as I write this, but the company has also been increasing its dividend for 53 straight years. And since 2020, its payout has increased by 64%, from $0.36 to $0.59, which averages out to a compounded annual growth rate of 10.4%. Dividend growth allows you to generate more recurring income from the same investment, helping to offset the effects of inflation.

What's encouraging is that there's still plenty of room for Abbott to continue raising its payout. When the company last reported earnings on July 17, its diluted per-share profit for the second quarter (which ended on June 30) was $1.01. If it were to maintain that level of profitability, its payout ratio would be around just 58% of earnings.

Plus, with the company also expecting its business to grow organically (excluding COVID-19 testing sales) by at least 7.5% this year, its bottom line is likely only going to get stronger. With strong and diverse operations spanning pharmaceuticals, nutritional products, diagnostics, and medical devices, Abbott is one of the better options for both retirees and risk-averse investors.

In five years, the healthcare stock has risen by 26% and, when including its dividend, its total returns are around 38%. This is a great investment to buy and hold, as it can do well under myriad economic conditions.

You don't have to be retired to love this stock

Keith Speights (AbbVie): I think AbbVie is an ideal stock for retirees. Like its parent company, Abbott, it's a Dividend King with 53 consecutive years of dividend increases. However, AbbVie's forward dividend yield of 3.3% is even more attractive than Abbott's.

Retirees like the stocks they own to be highly resilient. AbbVie checks off this box. The company's longtime top-selling drug, Humira, lost U.S. patent exclusivity in early 2023. Sales of the autoimmune disease drug tanked in the face of biosimilar competition. But AbbVie easily weathered the storm thanks to a strong product lineup featuring newer stars.

Humira's two successors, Skyrizi and Rinvoq, are on track to generate sales of $25 billion this year. That's well above Humira's peak annual sales of $21.2 billion in 2022. It's a great sign of resilience when a drugmaker can develop replacements that eclipse the sales of its best-seller within three years of its loss of exclusivity.

You don't have to be retired to love AbbVie, though. In a stock market that's priced for perfection, the big pharma company's shares are surprisingly cheap, with a forward price-to-earnings ratio of only 16.4.

AbbVie should also have solid growth prospects. CEO Rob Michael said in the recent second-quarter earnings call that the company is "very well positioned to drive growth in this decade" with its current portfolio. He also noted, "Without any significant LOEs [losses of exclusivity] this decade, we have the flexibility to invest more in R&D and to continue to acquire external innovation, and we will absolutely do that."

This stock is a retiree's dream come true

Prosper Junior Bakiny (Johnson & Johnson): Once one hits retirement, the focus often shifts away from investing in speculative stocks and turns instead to steady, reliable corporations. That description fits Johnson & Johnson well. The company has been a healthcare leader for decades, consistently generating growing revenue and profits. Johnson & Johnson's business is diversified across pharmaceuticals and medical devices. Even within these segments, Johnson & Johnson has a vast product portfolio spanning many therapeutic areas.

Furthermore, the company routinely develops newer and better products, which enables it to navigate patent cliffs and stiff competition. The drugmaker has indeed encountered some challenges in recent years. Johnson & Johnson is dealing with thousands of lawsuits related to its talc-based products, which may have given defendants cancer. Johnson & Johnson has also faced patent expiration for some of its products, including Stelara, a medication for plaque psoriasis and other autoimmune conditions.

Despite these issues, Johnson & Johnson remains an attractive investment. The company's rock-solid balance sheet, as evidenced by its credit rating that exceeds that of the U.S. government, should enable it to address legal challenges effectively. Furthermore, it has dealt with biosimilar threats to Stelara quite effectively and even recently increased its revenue and earnings guidance for 2025, despite a decline in Stelara's sales.

That should give investors even more confidence in Johnson & Johnson's ability to overcome obstacles. Finally, the company is a Dividend King and has raised its payouts for 62 consecutive years. All these reasons make Johnson & Johnson an ideal pick for retirees.

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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie. Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.