Drug giants' dividend streaks defy economy

Healthcare bills remain constant regardless of economic conditions, a reality that two S&P 500 drugmakers, Johnson & Johnson (JNJ) and AbbVie (ABBV), have leveraged for decades of uninterrupted dividend raises. J&J, founded in 1886, operates in essential sectors like prescription drugs and medical equipment, maintaining a 64-year streak of dividend increases. With $19.7 billion in free cash flow in fiscal 2025, its dividend payout represents about 65.5% of this, supported by a AAA credit rating.

AbbVie, a spin-off from Abbott Laboratories, focuses on treatments for chronic conditions, providing recurring revenue. It recently approved a 5.2% dividend raise to $1.82 per share. The company generated approximately $14 billion in free cash flow in the first nine months of the year, covering its dividend with about 65.5% of this cash. While its GAAP earnings may appear thin due to accounting charges, adjusted EPS guidance remains strong.

Both companies face risks: J&J contends with talc litigation and restructuring costs, while AbbVie navigates drug pricing policies and competitive pressures on its key medications. Despite these challenges, their consistent cash flow and ongoing portfolio growth suggest their dividend payouts are well-supported, offering income stability for investors.