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AbbVie Hikes Dividend by 35%, Launches $10B Buyback Plan

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AbbVie (ABBV - Free Report) announced a 35% hike in its quarterly dividend along with the authorization of a new $10 billion share buyback program by the board. AbbVie stock rose more than 1% on Thursday in response to the news.

The dividend was increased from 71 cents per share to 96 cents per share. The cash dividend is payable on May 15 to shareholders of record on Apr 13. The new quarterly dividend amounts to an annual dividend of $3.84 per share, which implies a dividend yield of 3.4%.

Please note that this is the second dividend hike for AbbVie in less than six months. In October last year, AbbVie announced an 11% hike in quarterly dividend to 71 cents per share from 64 cents per share.

AbbVie hiked its quarterly dividend by 4% in 2015 and 12% each in 2016 and 2017. In fact, since its inception in 2013, AbbVie has hiked its dividend by 140%.

On the fourth quarter conference call held last month, management hinted that shareholder returns were likely to go up as the company’s cash position has improved following the recent U.S. tax reforms.

In fact, AbbVie has performed exceptionally well in the past year, supported by a series of positive news. The stock has returned 86.9% in the past year, comparing favorably with a gain of 10.6% recorded by the industry.

AbbVie met primary endpoints in several pivotal studies – the key phase III MURANO study of Venclexta plus Roche’s (RHHBY - Free Report) Rituxan in relapse/refractory chronic lymphocytic leukemia; three phase III studies evaluating oral JAK-1 selective inhibitor, upadacitinib for rheumatoid arthritis and also a phase IIb study in atopic dermatitis; and four pivotal head-to-head phase III studies evaluating risankizumab versus Johnson & Johnson’s (JNJ - Free Report) Stelara and Humira, for moderate-to-severe chronic plaque psoriasis.

Meanwhile, AbbVie gained regulatory approvals in the United States, Europe, and Japan for its competitive HCV medicine Mavyret and FDA approval for the sixth indication of cancer drug, Imbruvica. In fact, Mavyret’s launch has been stronger than expected as informed by the company on its fourth-quarter conference call.

AbbVie also settled its patent disputes with Amgen (AMGN - Free Report) , which delayed the launch of the latter’s biosimilar version of AbbVie’s blockbuster arthritis drug, Humira in the United States to 2023 and in most countries in the EU to October 2018.

This agreement has removed a major overhang on AbbVie’s shares. Moreover, the agreement gave AbbVie ample time to focus on developing its pipeline and launching new products that will help make up for the loss of revenues once biosimilar Humira enters the market.

With several pivotal data readouts and regulatory milestones expected in 2018, the bullish run of the stock should continue in 2018. Importantly, Humira has been generating solid sales based on strong demand trends for the drug – a trend expected to continue this year. Imbruvica, AbbVie’s second most important drug, is also doing consistently well and has multibillion dollar potential. AbbVie is exploring the possibility of label expansion into solid tumors and autoimmune diseases. All these factors bode well for the stock.

AbbVie carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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