Assessing the Sustainability and Growth of AbbVie Inc's Dividends
AbbVie Inc (ABBV, Financial) recently announced a dividend of $1.55 per share, payable on 2024-02-15, with the ex-dividend date set for 2024-01-12. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into AbbVie Inc's dividend performance and assess its sustainability.
What Does AbbVie Inc Do?
AbbVie is a pharmaceutical firm with a strong exposure to immunology and oncology. The firm's top drug, Humira, represents close to half of the company's current profits. The company was spun off from Abbott in early 2013. The recent acquisition of Allergan adds several new drugs in aesthetics and women's health.
A Glimpse at AbbVie Inc's Dividend History
AbbVie Inc has maintained a consistent dividend payment record since 1972. Dividends are currently distributed on a quarterly basis.
AbbVie Inc has increased its dividend each year since 1972. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 52 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down AbbVie Inc's Dividend Yield and Growth
As of today, AbbVie Inc currently has a 12-month trailing dividend yield of 3.61% and a 12-month forward dividend yield of 3.80%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, AbbVie Inc's annual dividend growth rate was 9.60%. Extended to a five-year horizon, this rate increased to 15.90% per year. Based on AbbVie Inc's dividend yield and five-year growth rate, the 5-year yield on cost of AbbVie Inc stock as of today is approximately 7.55%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, AbbVie Inc's dividend payout ratio is 1.60, which may suggest that the company's dividend may not be sustainable.
AbbVie Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks AbbVie Inc's profitability 10 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. AbbVie Inc's growth rank of 10 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and AbbVie Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. AbbVie Inc's revenue has increased by approximately 13.40% per year on average, a rate that outperforms approximately 72.57% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, AbbVie Inc's earnings increased by approximately 8.30% per year on average, a rate that outperforms approximately 45.55% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 14.30%, which outperforms approximately 61.27% of global competitors.
Next Steps
Considering AbbVie Inc's consistent dividend payment history, robust dividend growth rate, and strong profitability and growth metrics, the company presents an intriguing case for value investors focused on income generation. However, the current payout ratio raises questions about the long-term sustainability of such dividend payments. Investors should weigh these factors alongside their individual investment strategies and risk tolerance. For those seeking to expand their portfolio with high-dividend yield stocks, GuruFocus Premium offers a comprehensive High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
