Welcome to the first article in a special 5-part series from Bob Ciura, contributing editor of Sure Dividend, highlighting the 5 highest-yielding Dividend Kings — a select group of 39 stocks that have increased dividends for over 50 years.
Healthcare stocks are generally attractive for income investors, because of their above-average dividend yields and reliable dividend growth. The major U.S. healthcare companies like AbbVie Inc. (ABBV) generate huge cash flow each year, even during recessions, which allows them to increase their dividends regularly.
Healthcare stocks like AbbVie will also benefit from the aging U.S. population, which should bring continued growth over the long-term. As a result, AbbVie is one of our top-ranked Dividend Kings today.
Business Overview & Growth Prospects
AbbVie is a biotechnology company focused on developing drugs for immunology, oncology and virology. It was spun off by Abbott Laboratories (ABT) in 2013. Going back to its days as a subsidiary of Abbott, AbbVie has increased its dividend for 50 consecutive years.
The company has generated impressive growth in 2021. Fourth-quarter revenues of $14.9 billion represented a 7% year-over-year increase. Revenues were positively impacted by healthy growth from new products. Earnings-per-share of $3.31 increased 13% and beat analyst estimates.
AbbVie also gave strong guidance for the upcoming year. Management expects adjusted EPS in a range of $14.00 - $14.20 for 2022, which would represent another year of considerable growth for the company.
There is some concern about the future of AbbVie’s growth, as its flagship product Humira is set to face patent expiration in the U.S. in 2023. Patent expirations are a big risk for pharmaceutical companies. Indeed, AbbVie management expects sales to decline in 2023, but the company is confident that it will return to positive growth in 2024.
Despite the challenge posed by the loss of exclusivity on Humira, we believe AbbVie has long-term growth potential. AbbVie has plenty of growth in the pipeline, both its own pipeline as well as through acquired products.
First, AbbVie’s own R&D has produced potential blockbusters like Skyrizi and Rinvoq which are projected to produce combined revenues of more than $15 billion by the middle of this decade, and not reach peak sales until the early 2030s.
AbbVie has also made acquisitions over the years to help bolster its portfolio. The most recent major acquisition was the $63 billion takeover of Allergan, provided AbbVie with a high-quality aesthetics portfolio, led by Botox Cosmetic, which is trademarked and faces no patent expiration.
AbbVie: Unique Combination Of Yield And Growth
AbbVie is an appealing dividend stock not only for its hefty 3.9% dividend yield, as well as its dividend growth. AbbVie has generated annual EPS growth of 15% since the spin-off from Abbott. It has followed suit by raising its dividend at an aggressive pace. According to the company, AbbVie has increased its quarterly dividend by more than 250% since 2013.
AbbVie’s 3.9% current yield is a relatively high yield among healthcare stocks. And, it is nearly three times the average yield of the S&P 500 Index. Therefore, due to its high dividend yield and strong growth potential, we view AbbVie as a top Dividend King. (Disclosure: The author is long ABBV.)
