Could These 3 Dividend Kings Be Worth $1 Trillion in 10 Years?

Key Points

• AbbVie, Johnson & Johnson, and Abbott Laboratories have impeccable dividend programs.

• All three are among the largest healthcare companies and boast excellent businesses.

• Only two of them have a realistic chance of reaching a $1 trillion valuation by 2035.

• 10 stocks we like better than AbbVie ›

The list of trillion-dollar stocks is small and doesn't feature a single medical company. That might change in the next decade, as several leading healthcare stocks have market caps that are inching closer to that milestone. AbbVie (NYSE: ABBV), Johnson & Johnson (NYSE: JNJ), and Abbott Laboratories (NYSE: ABT) are among the largest.

These healthcare leaders are well-established dividend payers -- all three are in the exclusive group of Dividend Kings that have increased their dividend for at least 50 years -- but can they deliver the kinds of returns they need through the next decade to hit a $1 trillion valuation? Let's find out.

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1. AbbVie

AbbVie's current market cap is about $369 billion. The drugmaker needs a compound annual growth rate (CAGR) of 10.5% to join the trillion-dollar club within 10 years. That's no easy feat, and some might point out that although AbbVie has performed better than that since splitting from Abbott Laboratories in 2013, a lot has changed for the company in the past few years. Notably, it lost patent exclusivity for its biggest cash cow, Humira.

Even so, my view is that the drugmaker has a good shot at accomplishing this feat. AbbVie's revenue and earnings are moving in the right direction again, thanks to Skyrizi and Rinvoq, two immunology drugs. Both medicines have been experiencing rapid sales growth, and this trend is likely to continue until they lose patent protection in the U.S. in 2033.

AbbVie is already working on a succession plan for these medicines, though. Recent acquisitions and licensing agreements in fields such as neuroscience, weight management, and oncology have improved its pipeline. Furthermore, the company has several products beyond its immunology lineup that continue to drive revenue growth, including cancer drug Venclexta.

AbbVie has a terrific underlying business, a deep pipeline that has proven it can overcome the biggest patent cliffs, and, of course, an excellent dividend program. It has increased its payouts for 53 consecutive years when considering the time it spent as a division of Abbott Laboratories, and offers a solid 3% forward yield as I write this. The company has a good shot at becoming a trillion-dollar stock in the next 10 years, but even if it falls short, it should generate solid returns, especially with dividends reinvested.

2. Johnson & Johnson

Johnson & Johnson is currently worth $429 billion. The 8.8% CAGR it needs in the next decade to become a trillion-dollar stock is well within its reach. The company generates consistent revenue and earnings due to its extensive portfolio of drugs and medical devices across multiple therapeutic areas. And although it will face some patent cliffs, the company should work around them, just like it is currently doing with immunology medicine Stelara.

The therapy lost patent exclusivity in Europe last year and in the U.S. this year. It was one of Johnson & Johnson's top-selling drugs. However, the company's top line continues to move in the right direction, and it has even recently increased its guidance for fiscal year 2025.

Johnson & Johnson will face some challenges in the next decade. It is still dealing with a barrage of talcum powder lawsuits and the threat of drug price negotiations. However, the healthcare giant will also have some important opportunities. It is currently developing a robotic-assisted surgery (RAS) device, the Ottava, which could help it enter this growing and severely underpenetrated market.

RAS could represent a significant growth driver for the company. Lastly, the dividend is solid, with 62 consecutive years of payout increases and a forward yield of roughly 3%. Johnson & Johnson can navigate its issues and become a trillion-dollar company by 2035. The stock is worth holding onto well beyond that.

3. Abbott Laboratories

With a market cap of $231 billion, Abbott Laboratories is the smallest of these three Dividend Kings and needs a CAGR of 15.8% to reach $1 trillion by 2035. In my view, that goal is beyond the company's powers. However, that doesn't mean Abbott isn't a worthwhile investment. The medical device specialist has plenty of things going its way that make the stock attractive. One of them is diversification. Although it is best known for its work in medical devices, Abbott Laboratories has three other segments: nutrition, diagnostics, and established pharmaceuticals.

The company has been able to weather the storm when one of its units encountered significant troubles. For instance, the company's medical device segment slowed almost to a halt during the early pandemic years, but Abbott kept things afloat by developing and marketing COVID-19 diagnostic products.

Additionally, the company has several key growth opportunities, particularly in diabetes care. Abbott Laboratories is a leader in the market for continuous glucose monitoring devices. Its FreeStyle Libre has become the most successful medical device in history in terms of dollar sales -- an impressive accomplishment.

Yet, the company has barely scratched the surface of its worldwide opportunity in this field, granting it significant room to grow. Lastly, Abbott has also increased its dividend payout for 53 consecutive years. Its forward yield of 1.8% isn't too impressive, but the company's excellent underlying business, consistent financial results, and attractive growth avenues more than make up for that.

Abbott should continue delivering strong returns while consistently growing its dividends, making it a top income stock to hold onto through the next 10 years.

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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.