If your stock portfolio hasn’t fully recovered from the 2022 bear market, you’re definitely not alone. Even after the fairly strong rally in growth and value stocks during the first half of 2023, most U.S. equities are still in the red over the previous 12 months.

However, this prolonged down period shouldn’t dissuade you from steadily buying shares of high-quality companies and holding them for the long haul, especially those that pay dividends on a regular basis. Blue chip dividend stocks, after all, have a proven track record of delivering stellar returns on capital over the long term.

Which top-shelf dividend stocks are worth buying right now? Allstate (ALL) and Pfizer (PFE) are two near-locks to produce healthy levels of capital appreciation over the next five to 10 years.

1. Allstate: 3.21% annualized yield
Allstate’s 2023 Q1 earnings report isn’t exactly a confidence-inspiring read. The national insurance company posted a net loss of $346 million for the three-month period due to higher catastrophe losses and elevated costs associated with auto insurance.

As a result of its rough 2022, Allstate’s stock has shed nearly 20% of its value over the past 12 months. This double-digit drop, however, represents a stellar buying opportunity for savvy investors.

The big picture is that insurance companies invariably go through boom and bust cycles. Losses from catastrophes tick up one year, predictably leading to an increase in premiums in the next. The same goes for auto insurance.

What’s important to focus on is Allstate’s ability to generate higher profits over the long term. Prior to its catastrophic 2022 financial performance, the company’s net income was up by 328% over the past 10 years. Moreover, the company’s net income has exhibited a high degree of volatility over the years, driving home the point that down cycles are part and parcel of the insurance business.

On the plus side, Allstate’s long-term profitability has allowed it to boost its dividend for 12 straight years. In turn, its ever-rising, highly reliable dividend has played a pivotal part in the company’s market-beating returns:

Overall, Allstate is more than likely to recover from this latest down period, making it a great bargain play for patient investors.

2. Pfizer: 4.36% annualized yield
Like Allstate, Pfizer has also been struggling of late. Over the last 12 months, the drugmaker’s shares have lost approximately 30% of their value.

Pfizer’s stock has cratered over this period in response to the decline in demand for its COVID-19 offerings and concern about future patent expirations. The company has also seen little to no enthusiasm from Wall Street for its $70 billion acquisition bonanza that included the takeover of cancer specialist Seagen, the immunology bolt-on Arena Pharmaceuticals, and the rare blood disorder company Global Blood Therapeutics, among others.

That said, this extreme bearishness appears to have gotten out of hand. At under 12 times forward earnings, Pfizer’s shares are easily the cheapest within its big pharma peer group. What’s more, Wall Street hasn’t attributed much, if any, value to either the company’s robust clinical pipeline or its spate of recent acquisitions. That’s a mistake that favors bargain hunters.

Speaking to this point, Pfizer is rapidly bringing its next generation of high-value medicines to market — medicines that include a potential mega-blockbuster respiratory syncytial virus (RSV) vaccine and multiple immunology drugs with enormous commercial potential, as well as a variety of cutting-edge cancer treatments. Pfizer also sports two underappreciated diabetes/weight loss drug candidates. Finally, its $43 billion acquisition of Seagen should cement the company’s future as a major player in the high-margin, high-growth oncology market.

Pfizer’s stock may be down, but it is far from out. Over the next decade, in fact, Pfizer ought to deliver stellar returns for patient investors, thanks to its heavy investments in rare diseases, cancer, infectious diseases, immunology, and metabolic disorders. In the interim, investors can bank the drugmaker’s rather hefty dividend yield.

— George Budwell

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Source: The Motley Fool