After its stock gained a third of its value over the past 60 days, AbbVie, Inc. (NYSE:ABBV) beat revenue and earnings expectations and obtained potential fuel that may allow it to extend its current share price uptrend.
The company’s share price exhibited steady growth and more than doubled from its initial public opening (IPO) price of $34.40 to more than $75 by August 2017. After a brief spike to nearly $125 over the next five months, the share price reversed direction and gave back those quick gains by the beginning of 2019.
However, the chart below illustrates that the share price was still at its long-term uptrend in January 2019. However, after dropping further, the share price has been rising steadily since mid-August 2019 and the positive results from the current quarterly report should continue to power the current share price recovery.
Released on November 1, AbbVie’s report for the third quarter of 2019 — which ended on September 30, 2019 — revealed a 3% increase in worldwide net revenues to $8.48 billion. Diluted earnings per share (EPS) were $1.26. The adjusted EPS of $2.33 was nearly 9% above the $2.14 adjusted EPS from the same period last year and beat analysts’ earnings expectations of $2.29 by 1.75%. After missing earnings estimates by 2% in the last quarter of 2018, AbbVie managed to beat earnings expectations in the last three consecutive quarters and four times in the last five periods.
The company’s current $1.07 quarterly dividend is 11.5% higher than the company’s $0.96 payout from the same quarter last year. This new quarterly payout corresponds to a $4.28 annualized distribution. Using the $79.55 share price as of closing on October 31, 2019, the current payout is equivalent to a 5.38% forward dividend yield. This is 32.5% above the company’s own 4.06% yield average over the past five years.
Additionally, AbbVie’s current yield level is the highest among the company’s peers in the Major Drug Manufacturers market segment. Furthermore, AbbVie’s current yield is at least 20% higher than the segment’s only other yields in excess of 4% — Takeda Pharmaceutical Co Ltd (NYSE:TAK) at 4.51% and GlaxoSmithKline Plc (NYSE:GSK) at 4.37%. As the segment’s top value, AbbVie’s current yield is nearly triple the segment’s 1.8% simple average, as well as nearly double the 2.8% average yield of the segment’s only dividend paying companies. Furthermore, in a sector that is renowned for its low dividend payouts, AbbVie’s current yield is nearly 10-fold higher than the 0.52% simple yield average of the entire Health Care sector.
As a separate legal entity, AbbVie’s current streak of consecutive annual dividend hikes only goes back six years. However, the company’s history of dividend payouts as part of Abbot Labs goes back several decades. In 2013 — the year of the divestiture from Abbott Laboratories — the two companies paid individual dividends. However, the sum of the two payouts was higher than Abbott Laboratories’ total dividend payout over the previous year. Furthermore, both companies have continued to hike their respective annual dividends every year since 2013.
Therefore, we can give credit for the past dividend hikes to both companies and consider the annual dividend hikes since 2012 to be a continuation of the previous streak. Under that assumption, AbbVie has boosted its annual dividend payout for the past 46 consecutive years. Since AbbVie is a component of the S&P 500 Index and meets all the other market capitalization, liquidity and trading volume requirements, we can include the company as a part of the S&P 500 Dividend Aristocrats group.
Even disregarding the dividend distributions that were delivered prior to 2013, AbbVie has enhanced its annual dividend distribution amount by nearly 170% just over the past six years that it has been its own business entity. That level of advancement corresponds to an average growth rate of nearly 18% per year.
The share price entered the trailing 12-month period by riding the downtrend that began in January 2018. After passing through its 52-week low of $94.27 on November 30, 2018, the share price declined by nearly 50% before reaching the 52-week low of $62.98 on August 15, 2019.
However, since reversing its trend in mid-August, the share price has recovered more than half of its losses since the November peak and closed on October 31, 2019, at $79.55. This was flat with the price level of one year ago and 26% higher than the 52-week low from August. Furthermore, the share price surged 3.5% on positive financial results in just the first hour of trading on Nov. 1. The share price trailed off a little afterwards even though it held on to a 2.5% gain as of noon on the same day.
With the share price at last year’s levels, dividend income payouts have contributed all of the total gains of approximately 5% over the trailing 12 months. However, capital gains have contributed most of the total gains of more than 60% over the past three years.
Headquartered in North Chicago, Illinois, and founded when Abbott Labs (NYSE:ABT) divested its proprietary pharmaceutical business in 2013, AbbVie Inc. discovers, develops, manufactures and sells pharmaceutical products. The most prominent pharmaceutical brands in the company’s current portfolio are HUMIRA for the treatment of autoimmune diseases, IMBRUVICA for the treatment of patients with chronic lymphocytic leukemia and VIEKIRA PAK for the treatment of adults with hepatitis C. Additionally, AbbVie offers pharmaceutical treatments for HIV, hypothyroidism, prostate cancer, endometriosis, anemia, Parkinson’s disease and multiple sclerosis, as well as treatments for testosterone replacement therapy and pancreatic enzyme therapy for exocrine pancreatic insufficiency.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.
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