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Why AbbVie (ABBV) is a Top Dividend Stock for Your Portfolio

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

AbbVie in Focus

AbbVie (ABBV - Free Report) is headquartered in North Chicago, and is in the Medical sector. The stock has seen a price change of 1.75% since the start of the year. The drugmaker is paying out a dividend of $1.3 per share at the moment, with a dividend yield of 4.77% compared to the Large Cap Pharmaceuticals industry's yield of 2.39% and the S&P 500's yield of 1.39%.

Taking a look at the company's dividend growth, its current annualized dividend of $5.20 is up 10.2% from last year. AbbVie has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 20.82%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. AbbVie's current payout ratio is 44%. This means it paid out 44% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for ABBV for this fiscal year. The Zacks Consensus Estimate for 2021 is $12.64 per share, which represents a year-over-year growth rate of 19.70%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ABBV is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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