Are These 3 Elite Dividend Stocks a Buy After Q1 Earnings?

Elite dividend stocks are highly prized assets by investors. The core reason is that companies with a rich tradition of paying an above average-yield and/or steadily raising their yield tend to outperform the broader markets over the long haul.

Even so, investors should always keep a close eye on the financial health of their top dividend holdings. Fortunately, quarterly earnings reports offer shareholders a window into the health of a company over the prior three months, as well as an important glimpse into what may be on the near-term horizon.

A sticky note that reads dividends.

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Armed with this insight, here is a brief health check on three popular dividend stocks following their 2023 first-quarter earnings reports last week.

1. AbbVie

AbbVie (NYSE: ABBV) reported first-quarter earnings last week that were largely in line with analysts' forecasts. Wall Street's expectations for the drugmaker's Q1 earnings, however, weren't great. AbbVie posted a nearly 10% decline in net revenue for the three-month period, relative to a year ago. Moreover, it announced a hefty 22.2% drop in adjusted diluted earnings per share (EPS) for the quarter.

AbbVie attributed most of these declines to biosimilar competition for Humira, the company's mega-blockbuster immunology medicine. On the plus side, management decided to raise full-year adjusted earnings per share guidance by $0.10 in response to the better-than-expected performances of its newer immunology meds, neuroscience portfolio, and the resilience of its aesthetics portfolio.

What's the key takeaway? With a trailing-12-month payout ratio of 85% and a highly levered balance sheet stemming from a series of costly business development (BD) deals, AbbVie's dividend is starting to look a tad shaky. The bottom line is the drugmaker may have to reroute some of its free cash flows to engage in additional BD activity. Taking on more debt, after all, doesn't appear like a particularly wise option for the company in this environment.

All things considered, AbbVie stock doesn't stand out as a great buy post-Q1 earnings, despite its rather attractive 3.91% dividend yield.

2. Altria

American tobacco giant Altria (NYSE: MO) posted mixed Q1 financial results last week. Specifically, the company modestly beat Wall Street's bottom-line consensus estimate by $0.01, but it missed analysts' top-line forecasts for the three-month period by $130 million, according to FactSet. Altria attributed this top-line miss to the years-long trend of declining cigarette smoking in response to widespread inflation.

On a positive note, the company announced another quarter of market share gains for the oral tobacco product on! and it noted that the pending acquisition of U.S. vape manufacturer Njoy Holdings remains under review with the Federal Trade Commission. Altria also reaffirmed its 2023 full-year adjusted diluted EPS in a range of $4.98 to $5.13, representing an adjusted diluted EPS growth rate of between 3% and 6% for the year.

Dividend-wise, Altria's management said the plan is to stick to its goal of raising the annual payout by mid-single digits through 2028. As a result, the company's sky-high 7.9% yield appears to be a safe bet for at least the next five years. That being said, there are more compelling dividend and growth plays in the legacy tobacco space than Altria. International tobacco behemoth Philip Morris, for instance, offers investors far stronger near-term growth prospects, as well as a sizable dividend yield of 5.08%.

3. Medical Properties Trust

Healthcare real estate investment trust (REIT) Medical Properties Trust (NYSE: MPW) announced 2023 first-quarter results last week that were largely in line with analysts' expectations. However, the company did roll out a sharp downward revision for its full-year EPS, reflecting the recent sale of its Australian hospitals.

The biggest highlight, though, is that Medical Properties Trust didn't announce any more major tenants falling behind in rent during the three-month period. As a direct result, the REIT's management team believes that the company's enormous 14.6% dividend yield ought to be sustainable in the near term.

There is an important caveat to this story, however. Thanks to its deteriorating earnings power, Medical Properties Trust's dividend payout ratio now sits at an uncomfortable 97%. So, to maintain its dazzling dividend yield, the REIT will likely have to recover a big chunk of these outstanding rent payments. Management appears confident that it will indeed recoup a fair amount of delinquent rent from top tenants like Prospect Medical. But a lot is riding on this proposition for income-seeking shareholders.

All told, Medical Properties Trust is facing a tough operating environment with stubborn levels of inflation and elevated interest rates. So while its current yield might be enticing, there are far safer plays in the ultra-high-yield dividend space. As one example, Icahn Enterprises, a master limited partnership, offers stakeholders a 15.7% annualized payout, along with a fairly robust outlook over the balance of the current decade.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.