Is AbbVie The Perfect Dividend Stock For Retirees?

Retirees have typically turned to investment vehicles that are stable and relatively safe, such as bonds or CDs. Because of the stock market’s volatility, many retirees have been reluctant to invest in stocks at all, or at least outside of the relative safety of a mutual fund or ETF.

However, certain stocks have proven they can be just as reliable for retirees, and pharmaceutical company Abbvie (NYSE: ABBV) is an entrant in that category.

ABBV has performed better than any bond over the past five years. It’s also performed better than the S&P 500 over the period, gaining 103% against the benchmark index’s 82.6% return.

The pharma giant, best known for the rheumatoid arthritis drug Humira, posted a solid 12-month return of 10%. That’s in spite of Humira losing its patent protection last year and losing share to generics. Still, the drugmaker has a healthy pipeline of products that have already proven they can more than make up for Humira’s slack.

ABBV has been able to notch impressive gains along the company’s rise to a market capitalization of $284.8 billion. For almost a decade, Abbvie has also consistently given back to its shareholders through dividends. For retirees, the major selling point for the stock is the annual dividend yield of 3.86%.

So is Abbvie the perfect dividend stock for retirees?

Abbvie Dividend Stock Increase

Abbvie dividend increases have occurred over the past 11 years consecutively resulting in an annualized payout of $6.20 per share.

When Abbvie reported its earnings for the 1st quarter of 2024 in April, the share price had been on somewhat of a decline. Investors were concerned about the company’s ability to replace the revenue from Humira. Yet even though the quarter wasn’t jawdropping, it should serve to reassure investors that Abbvie isn’t a one-drug wonder.

Net revenue of $12.3 billion represented a 0.7% improvement over the 1st quarter of 2022. It also beat revenue estimates by 3.14%. That’s a big win considering revenue from Humira fell by almost 36% in the quarter to $2.27 billion. But even with that sharp decline, net revenue from the company’s immunology segment only dropped 3.9% overall.

It’s a great sign that Abbvie has a stable portfolio of drugs to lean on as patent protections run out. For example, net revenue from the company’s oncology and neuroscience divisions was up 9% and 15.9% respectively.

Though revenue gains were impressive given Humira’s new competition, the company’s bottom-line beat was also exceptional. Abbvie’s $1.37 billion in net income blew away 2023’s result by around 473%. Diluted earnings per share equaled $0.77, which beat expectations by 2.18%.

While the company had a very solid quarter, investors didn’t exactly flock to the stock. ABBV is up 1% since the earnings release.

Will Abbvie Stock Keep Going Up?

That might not displease retirees who were looking for stability over gains. But there is still plenty of opportunity for Abbvie to reward its investors that way.

The company completed its $10.1 billion acquisition of Immunogen in the first quarter, which makes antibody-drug conjugate Elahere for the treatment of ovarian cancer. The drug received full FDA approval after passing Phase 3 trials.

Revenue from Elahere may take some time to impact the bottom line, but that treatment is just one of a stable of drugs. Skyrizi and Rinvoq are the two drugs that should keep the company on solid footing both in the short term, and for years to come.

Skyrizi has 35% of the U.S. market share for Psoriasis, but It has also begun to steal market share from Stelara for inflammatory bowel disease. Rinvoq has been used to treat everything from ulcerative colitis to Crohn’s disease.

Skyrizi brought in $2 billion in net revenue compared to Rinvoq’s $1 billion in the 1st quarter, and sales of both drugs were up over 40% year-over-year.

After the successful first quarter, the Board of Directors raised its full-year EPS guidance for 2024 from between  $10.97 and $11.17 per share to a range of $11.13 to $11.33 per share.

How Do Analysts Rate Abbvie Stock?

Though investors at large have been reluctant to jump back on board with ABBV, Wall Street analysts largely believe that the stock is a winner. Out of 29 analysts who have rated the stock, 17 assess it to be a Buy.

Four of those analysts forecast that ABBV share price will outperform the market over the next 12 months. The highest forecast has Abbvie shares reaching $207 per share, a 28.3% jump from where the stock currently trades.

If the average forecast comes to fruition, AbbVie has the potential to rise 13.4% to $182.92 per share during the next 12 months. Though there isn’t a sell recommendation, there are 12 Hold ratings. The lowest forecast estimates that the stock will remain above $161 per share over the coming year.

Is Abbvie Stock Undervalued?

Analysts clearly believe ABBV has room to rise, thought the stock’s price-to-sales (P/S) value of 5.22 might seem to be at odds with their forecasts.

Both Pfizer and Johnson & Johnson have P/S values below Abbvie, suggesting the stock could still be a bit overpriced. Eli Lilly, however, has a P/S value of 19.26.

Retirees are likely to be content if the stock makes good on the 13.4% consensus price target because Abbvie also pays a generous dividend. The company’s 3.84% annual dividend yield means a quarterly dividend payout of $1.55 per share.

Is Abbvie Stock a Buy or Sell?

Dividend investors of all ages can appreciate the value Abbvie delivers, but retirees who are looking to diversify beyond bonds and high-yield savings accounts should may be the most apt buyers. Abbvie has shown solid, consistent growth, and has rewarded investors in kind.

It’s certainly a concern that the company’s flagship drug is phasing out, but Abbvie has a strong pipeline that is already replacing that revenue. The company beat revenue and earnings estimates for the first quarter, and Abbvie leadership raised its guidance for the year.

The company also has the ability to expand its pipeline through acquisitions, as it did with the Immunogen buy. All in all, Abbvie is a very healthy stock and a strong consideration for retirees looking to strengthen their portfolio.

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