Quick Read
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J&J has raised its dividend for 64 consecutive years and AbbVie just approved a 5.2% raise, both paying out ~65% of free cash flow.
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AbbVie's Humira replacements Skyrizi and Rinvoq now generate over $8 billion combined, growing roughly 23% each quarter.
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J&J holds one of only two AAA credit ratings among U.S. companies, higher than the U.S. government's own rating.
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Arthritis flares, cholesterol checks and cancer treatments arrive on their own schedule, in recessions and booms alike, which is why healthcare draws attention from retirees building an income plan. It also gives boomers a second advantage. As spending on prescriptions and procedures rises with age, owning the companies that supply them sends some of that money back as dividend checks. Two S&P 500 drugmakers show the safety that matters most here, backed by cash flow, balance sheets and long payout records: Johnson & Johnson( NYSE:JNJ ) and AbbVie( NYSE:ABBV ). J&J's latest raise marked its 64th consecutive year of dividend increases.
Johnson & Johnson: 64 Years of Dividend Raises and Counting
J&J, founded in 1886, runs two businesses that patients need in any economy: prescription drugs through its Innovative Medicine unit and surgical and orthopedic equipment through MedTech. Trailing 12-month revenue totals $99.33 billion, and the company sits among the largest members of the S&P 500. For an income investor, that scale means the dividend draws on hundreds of products sold around the world instead of one blockbuster.
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J&J recently traded at $272.98 and yields 1.92% on its trailing payout of $5.28 per share. The yield looks modest partly because the shares have climbed 47.64% over the past year. The quarterly dividend now stands at $1.34 after a 3.1% raise from $1.30, which works out to a forward annual rate of $5.36. The next check is payable December 8 to holders of record on November 24.
Free Cash Flow Covers the Dividend With Room to Spare
J&J produced $19.7 billion of free cash flow in fiscal 2025. Paying the forward dividend rate on 2,407,310,000 shares costs about $12.9 billion a year, or roughly 65.5% of last year's free cash flow. That leaves billions for research, acquisitions and legal costs after shareholders are paid. On an earnings basis, fiscal 2025 EPS of $10.79 sat well above the dividend.
The track record holds up when checked against the payment history. The quarterly rate rose every year from $0.70 in 2014 to $1.01 in 2020 and $1.34 today, and the record of quarterly payments runs back to 1999. The balance sheet carries a rare distinction. J&J is one of only two U.S.-based companies with a AAA credit rating, higher than that of the United States government. The stock's beta of 0.206 also points to a smoother ride than the broader market.
Why J&J Can Anchor a Portfolio for Decades
The growth engine is cancer care. In the second quarter, oncology sales rose 17.3%, led by DARZALEX at $4.21 billion (up 18.9%). The immunology drug TREMFYA jumped 72.5% to $2.05 billion, and cell therapy CARVYKTI grew 49.4%. That growth came even as biosimilars cut STELARA sales 55.2% to $740 million, which shows the portfolio can absorb a major patent loss. In the third-quarter release, management raised its full-year outlook, and Chairman and CEO Joaquin Duato said recent investments give the company "clearer line of sight to double-digit growth by the end of the decade." At a forward P/E of 23, the valuation reflects that stability.
What Would Break the Case
Talc litigation is the threat to watch. Third-quarter GAAP earnings fell 95.9% year over year, mostly because of a one-time special charge for the proposed talc litigation resolution along with two deal-related costs. Second-quarter results already included $267M in litigation charges. If legal costs keep returning at that scale, and if a planned orthopaedics spin-off and supply chain restructuring of $650M to $750M through fiscal 2029 drain cash at the same time, the free cash flow buffer behind the dividend would shrink.
AbbVie: A Fresh Dividend Raise Backed by Post-Humira Growth
AbbVie began as a spin-off of Abbott Laboratories( NYSE:ABT ) and now sells treatments for autoimmune disease, psychiatric and neurological conditions, cancer, and aesthetics. It is also a current S&P 500 constituent. Third-quarter revenue rose 10.3% to $17.40B, beating estimates, and adjusted EPS of $3.82 came in ahead of the $3.78 consensus. These are chronic conditions that patients treat for years, which gives AbbVie recurring revenue that acts like an annuity.
AbbVie yields 2.24% on its current quarterly rate of $1.73. On October 30, the board approved a 5.2% raise to $1.82 per share, starting with the dividend payable Feb 16, 2027. That sets a new annual rate of $7.28, or about 2.47% at the recent $294.31 share price.
Cash Flow Funds the Dividend, Even Though GAAP Earnings Look Thin
AbbVie generated about $14 billion of free cash flow in the first nine months of the year. Three quarterly payments at the current rate across 1,767,117,000 shares cost about $9.17 billion, roughly 65.5% of that cash. One problem for retirees: trailing GAAP EPS of $5.82 sits below the $6.92 annual payout, because amortization and acquisition accounting charges weigh on reported earnings. Adjusted EPS guidance, raised again to $13.95 to $13.99, means the new annual dividend uses about 52.2% of the low end. As the CFO put it, "This robust free cash flow supports a strong and growing quarterly dividend."
The payment history is steady. Quarterly dividends have arrived every quarter since 2013, when the rate was $0.40, and the rate stepped up each year to $1.18 in 2020 and $1.73 today. Management noted, "Since inception, we have grown our quarterly dividend by more than 350%."
Its balance sheet is adequate, though less clean than J&J's. Net debt runs 2.26x EBITDA, interest coverage is 6.94x, and the company held $10.8 billion in cash at the end of September. Management says it remains on track to reach a net leverage ratio of two times over the next two to three years. Shareholders' equity is negative, a result of years of debt-funded deals and buybacks, so leverage deserves monitoring.
Why AbbVie Can Pay Retirees for Decades
AbbVie has largely moved past its biggest patent loss. Humira sales fell to $683M, while its replacements keep growing: Skyrizi reached $5.78B (up 22.7%) and Rinvoq $2.71B (up 23.9%). Neuroscience added $3.39B, up 19.4%, and the completed Apogee Therapeutics acquisition expands the immunology pipeline. CEO Rob Michael said, "Our existing products and pipeline give us a clear line of sight to strong, durable growth into the 2030s." A forward P/E of 18 is reasonable for that growth.
What Would Break the Case
Drug pricing policy is the biggest danger. Imbruvica sales dropped 26.1%, which management attributed to IRA pricing and competitive share pressure. AbbVie now depends heavily on Skyrizi and Rinvoq. If government price setting or new competition hits those two drugs before the pipeline is ready to replace them, cash flow would tighten just as the company is still working its leverage down.
Two Healthcare Payers Built for a Long Retirement
J&J and AbbVie each spend only about two-thirds of their free cash flow on the dividend, and both raised payouts in the latest round. J&J offers AAA-rated stability and a 64-year raise streak, while AbbVie offers faster dividend growth driven by its post-Humira drugs, and investors should watch J&J's talc litigation and orthopaedics spin-off, plus IRA pricing for Skyrizi and Rinvoq. Together, they turn age-driven healthcare spending into income built for a long retirement.
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