2 Dividend Stocks to Buy With $500 and Hold Forever

Globe and Mail

23-05-2025

Broader equities have been volatile this year, but that's par for the course. The fact that the stock market will sometimes go through erratic periods is not a good reason not to invest. However, times like these might help remind us that some corporations are more resilient than others. Among the most resilient are longtime dividend payers with excellent underlying businesses and strong outlooks.
That description fits Zoetis (NYSE: ZTS) and Abbott Laboratories (NYSE: ABT), two giants in the healthcare sector. For those with $500 to spare (not being saved for emergencies) and in the market for income stocks to park in their portfolios, here's why these two companies are outstanding candidates to put that money into now.
1. Zoetis -- $164 per share
Zoetis is a leading animal health company. The company's portfolio of products is deep and diversified. It markets medicines for companion animals, livestock, fish, poultry, and more. Zoetis has over 300 product lines and about 15 that generate over $100 million in annual revenue. Despite its usually strong performance, Zoetis has encountered some issues in the past year. The company's guidance for its fiscal 2025 was weak, or at least so the market thought.
Furthermore, Zoetis will face increased competition for one of its growth drivers. The company's Apoquel, which helps relieve allergic itch in dogs, has been a top performer, but one of Zoetis' rivals, Elanco Animal Health, launched an alternative last year. While competition has been, and will continue to be, one of Zoetis' threats, the animal health specialist has been successful despite that. It routinely grows its revenue at a faster rate than the industry average. It is the leader, or one of the market leaders, across most categories and regions where it operates. The company also has important long-term growth drivers.
Zoetis' companion animal segment generates the most revenue and is the most promising. Younger generations (millennials and Gen Z) have fewer kids than previous generations but are increasingly humanizing pets. Some of the spending which, for older folks, would have gone into caring for children will be redirected toward cats and dogs due to this dynamic. That should benefit Zoetis, which continues to develop and market newer and better pet care products.
That's just one long-term tailwind. Here's another. A growing world population will lead to an increased demand for animal protein. To provide that in spades, we need to care for livestock, something else Zoetis specializes in. The company might encounter issues in the short run due to marketwide troubles and mounting competition, but Zoetis' long-term prospects look attractive thanks to its impressive track record in the industry and its existing lineup of products.
Lastly, Zoetis is a terrific dividend stock, even with a mediocre forward yield of 1.2% -- the S&P 500 's average is 1.3%. Zoetis has increased its payouts by 502% in the past decade while still boasting a conservative cash payout ratio of 34.2%. The stock should consistently deliver more dividend growth and solid returns to investors holding on to it for good.
2. Abbott Laboratories -- $136 per share
Abbott Laboratories is best known for its work in the medical device market. Sure enough, this segment is home to its most attractive sources of revenue and biggest growth drivers, but one of the company's strengths is its diversification. Abbott is also a leader in nutrition, boasts a solid diagnostic segment, and markets various pharmaceutical products. Abbott Laboratories has succeeded in keeping its business afloat even when significant problems in one segment or another arise, thanks to its reliance on multiple sources of revenue.
That's why it routinely generates consistent revenue and earnings. Meanwhile, the company's prospects look strong. One of the company's key growth drivers is its FreeStyle Libre franchise, a family of continuous glucose monitoring (CGM) systems. The healthcare leader has to contend with stiff competition from DexCom in this area, but despite this long-standing challenge, the FreeStyle Libre has become the most successful medical device ever in terms of dollar sales -- and there is still ample room for growth, considering that the worldwide CGM diabetes market remains underpenetrated.
Elsewhere, several other product lines and segments should see increased demand over the long run due to an aging worldwide population. Consider Abbott's MitraClip, a minimally invasive option to treat a serious heart problem called mitral valve regurgitation. This issue is more common among people aged 65 and older. That's why demand for the MitraClip (or other products like it that Abbott manufactures) will grow as people aged 65 and up make up a larger percentage of the population. It might not make a massive difference for just one of these products, but higher demand across the range of the company's portfolio will meaningfully affect its results.
Turning to Abbott's income profile, the company has raised its payouts for 53 consecutive years, making it a Dividend King. The stock might only offer a yield of 1.8%, but its cash payout ratio looks reasonable at 60.4%. Abbott will encounter some issues. It is facing lawsuits over its infant formula products for premature babies allegedly causing fatal illnesses, among others. It will also have to deal with a competitive landscape and, potentially, the continuing threat of tariffs that could increase its costs and squeeze its bottom line.
However, Abbott's strong presence in the healthcare industry, solid underlying business, and innovative capabilities should allow it to continue performing well over the long run, despite the headwinds. It's an excellent buy-and-hold forever stock for income seekers.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Zoetis. The Motley Fool recommends DexCom and recommends the following options: long January 2027 $65 calls on DexCom and short January 2027 $75 calls on DexCom. The Motley Fool has a disclosure policy.