Monday, April 4, 2016

Recent Buy: AbbVie Inc.


March 9, 2016: Bought 44 shares of ABBV at $56.16 per share.

AbbVie Inc. (NYSE:ABBV) is a world-wide, research-based biopharmaceutical company that develops and markets products to treat conditions such as chronic autoimmune diseases, including rheumatoid arthritis, psoriasis and Crohn's disease; hepatitis C; human immunodeficiency virus (HIV); endometriosis; thyroid disease; Parkinson's disease; complications associated with chronic kidney disease and cystic fibrosis, and other health conditions. ABBV was incorporated in 2012 and is based in North Chicago, Illinois.

ABBV spun off from Abbott Laboratories (NYSE:ABT) in January 2013, so the company does not yet have a long track record of paying and raising dividends. The company has top-notch financials, with a double-digit growth rate for each of the last 3 years. I expect significant dividend growth from ABBV in the next few years.

I already own 36 shares of ABBV, so with this buy I'm increasing my total holding to 80 shares. Average yield on cost (YoC) is 3.66% and my cost basis per share is now $62.34. DivGro's projected annual dividend income increases by $100.32. Here is a chart showing my buy prices:


Following is a table containing updated ratings of ABBV from various sources:

 MorningStar Rating (****-
 Dividend.com's DARS Rating  3.5/5 (Recommended) 
 TheStreet Ratings B+ (Buy)
 The Motley Fool's CAPS Rating (****-) 
 Thomson Reuters StockReport+ (6/10) Neutral 
 S&P Capital IQ's Stock Report Buy (****-) 
 Zacks Rank (Style Score)  3-Hold (VGM:B)
 †combined Value/Growth/Momentum score

According to Tipranks, based on 7 ranked analysts offering 12-month price targets in the last 3 months, the average price target for ABBV is $71.50. Morningstar's fair value estimate is $65.00 while S&P Capital IQ has a fair value calculation of $120.80. Based on the median of these prices ($71.50), my buy price is discounted by about 21%.

Why ABBV?


I like ABBV's efforts to return value to shareholders in the form of share buybacks and dividend payments. Recently, the company's share repurchase authorization was increased by $5 billion to $10 billion. Furthermore, ABBV hiked its quarterly dividend by 12% for 2016. Since inception, the company's dividend has increased by more than 42%. 

ABBV supports its strong dividend yield with strong cash flows that are very secure over the next few years. Sales of Humira, one of the best immunology drugs for rheumatoid arthritis, Crohn's disease, and psoriasis, increased nearly 12% to $14 billion in 2015. The company expects Humira to deliver growth in the high-teens in the USA in 2016.

The company is working hard on improving its pipeline, through acquistions, collaborations and, of course, research and development. ABBV maintained its 2015 EPS guidance of $4.90 to $5.10, which represents double-digit growth. 
Do you own shares of ABBV? Do you think ABBV is a good dividend growth prospect?

4 comments :

  1. Great buy Ferdi. This stock has been quite lately, not many people buying it. I hadn't realized that it's dipped so much. I'll take a closer look. Thanks for sharing.

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    Replies
    1. Thanks for reading and commenting, Investment Hunting. Yes, ABBV has been quite quiet :-)

      Please let me know what you think of the stock after taking a look. I like it for the reasons mentioned... I'm hoping the revenue growth translates into dividend growth here...

      Delete
  2. I am right there with you FerdiS. I bought 3-8-16, $55.41-- so it looks like one day earlier than you! Nice to see we were thinking alike.

    This was first "pure" health care sector company so I was very happy to add it. I have HCP & OHI as health care Reits. Looking to add more health care but it just keeps running away. I should have bought Anthem (ANTM) a month ago and passed. Sorry I did that. Keep an eye on them. They are shaking out as the leading single payer option as the insurance payers consolidate.

    ReplyDelete
    Replies
    1. That's a great price! Happy to be a fellow investor alongside you, Mike A!

      Seems like we're also thinking alike on HCP and OHI. I own a few more health care stocks: GILD, JNJ and PFE. May be too pricey or to risky for you right now. I'll look into ANTM a bit. Have not done so yet.

      I'm a little heavy on Health Care stocks right now. Not as bad as Consumer Staples, but still.

      Thanks for visiting and commenting, and take care!

      Delete

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