Israel Englander is a famous and successful hedge fund manager who founded Millennium Management. This hedge fund firm has delivered excellent returns over the past few decades, so it is worth taking a look inside its portfolio. During the second quarter, Izzy Englander and his team made several notable purchase decisions, including increasing their stakes in two dividend-paying companies: AbbVie (NYSE:ABBV) and Costco (NASDAQ:COST). The firm more than doubled its position in both stocks. Should retail investors follow suit?

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AbbVie has faced challenges in recent years, including a major patent cliff and clinical setbacks that have weighed on the stock. Somehow, the company always manages to bounce back. AbbVie's shares have moved in line with the S&P 500 this year, and they may continue doing so -- and perhaps even outpace broader equities -- over the medium term. Consider several reasons why. First, AbbVie's core business is rock-solid.

The company's two growth pillars, the immunology medicines Skyrizi and Rinvoq, are doing much of the heavy lifting. In the second quarter, AbbVie's revenue grew by 10.2% year over year to about $17 billion. Sales from Skyrizi and Rinvoq grew much faster than that, lifting the company's average. Neither medicine will lose patent exclusivity until the next decade, so they still have plenty of growth fuel left. And it's also worth noting that AbbVie has no remaining significant patent cliff through the end of the current decade.

Second, AbbVie has a deep pipeline with several products that could become blockbusters. One of them is ABBV-295, an investigational long-acting weight-loss candidate. ABBV-295 is an interesting product that could carve out a niche in the fast-growing anti-obesity market, as it could be administered monthly and address the need for weight-loss options with fewer adverse events. ABBV-295 is still in early-stage studies. There is a long road ahead before it can hope to earn approval.

But ABBV-295 is only the tip of the iceberg when it comes to AbbVie's pipeline. Consider the company's recent acquisition of Apogee Therapeutics for $10.9 billion in cash. Apogee brings a highly promising phase 3 asset, zumilokibart, under development for atopic dermatitis. Zumilokibart could have the advantage of being administered less frequently than current medicines in this area while sacrificing little in efficacy. AbbVie still has to demonstrate that in phase 3 studies, but this is a candidate that could help solidify its position in the immunology market.

Third, AbbVie is a fantastic dividend stock. When including the time it spent as a division of Abbott Laboratories (NYSE:ABT), the company is a Dividend King, or a corporation with 50 -- or more -- consecutive years of payout increases. Reinvesting dividends can significantly boost long-term returns, particularly with a stock that consistently grows its payouts like AbbVie does. That's another reason the company may outperform broader equities, and is worth investing in today for long-term, income-seeking investors.

Costco has faced a fairly volatile environment this year. Soaring gas prices and other macro headwinds have weighed on the company's business. Meanwhile, the stock remains fairly expensive. Costco is trading at 40.8x forward earnings, versus an average of 21.6x for consumer staples stocks. Investors are willing to pay a premium for Costco, so long as the business remains healthy.

But like always, expensive stocks can decline meaningfully at any sign of trouble, and that's what has happened to the retail giant. Costco's shares are down 4% over the past year, while the S&P 500 has gained 19%. That said, Costco's financial resuls has proved fairly resilient despite the headwinds it is facing.

In the third quarter of the company's fiscal year 2026 (its period that ended on May 10), Costco's revenue grew by 11.6% year over year to $70.5 billion. Comparable sales rose 9.8%, while the company's earnings per share were $4.93, up 15% versus the comparable period of the previous fiscal year. Costco may remain somewhat volatile in the short run as it navigates an uncertain environment, but there is a lot to like about the company's long-term prospects.

Costco's subscription business model provides a high-margin, recurring revenue stream and a powerful incentive for customers to keep shopping in its stores to get their money's worth from their subscriptions. That alone grants the company a solid competitive advantage. It also has a strong e-commerce business that should help lift profits and margins over the long run. Then there is the dividend. Costco has raised its payouts for 22 consecutive years.

That's not close to Dividend King status, but it's still impressive. Despite Costco's low 0.6% forward yield, the company is a solid income stock to hold onto for a while. I'd follow Israel Englander's lead on this one.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Abbott Laboratories, and Costco Wholesale. The Motley Fool has a disclosure policy.

Billionaire Israel Englander Is Doubling Down on These 2 Outstanding Dividend Stocks. Should You? was originally published by The Motley Fool