Dividend Kings In Focus: AbbVie – Sure Dividend

Up to date on October thirtieth, 2024 by Felix Martinez

We imagine long-term traders ought to give attention to the highest-quality dividend development shares. These are firms with lengthy histories of elevating their dividends, and sturdy aggressive benefits to gasoline continued dividend development.

Subsequently, we are likely to steer traders towards the Dividend Kings, a gaggle of simply 53 shares with not less than 50 years of dividend will increase.

You may also obtain an Excel spreadsheet with the complete record of all 53 Dividend Kings (plus vital metrics equivalent to price-to-earnings ratios and dividend yields) by clicking on the hyperlink under:

We evaluation every of the Dividend Kings yearly. The following inventory to be reviewed on this 12 months’s version is AbbVie (ABBV).

There are questions relating to AbbVie’s future development resulting from its flagship drug, Humira, dealing with patent expiration. Nevertheless, the corporate has a plan to proceed rising within the years forward.

Enterprise Overview

AbbVie is a worldwide pharmaceutical large. It started buying and selling as an unbiased firm in 2013 after being spun off from Abbott Laboratories (ABT). Because the spin-off, AbbVie has generated sturdy development. Based on AbbVie, income and adjusted EPS development elevated by 14.7% and 19%, respectively, every year from 2013 to 2021.

Immediately, AbbVie focuses on one major enterprise section—prescribed drugs. It focuses on just a few key therapy areas, together with immunology, hematologic oncology, neuroscience, and extra.

Supply: Investor Presentation

Because the spin-off from Abbott, AbbVie has produced glorious development, largely resulting from Humira, a multi-purpose drug. The problem for AbbVie is that Humira is now dealing with biosimilar competitors after it has misplaced patent exclusivity.

Even so, AbbVie stays an enormous within the healthcare sector, with a big and diversified product portfolio.

AbbVie’s third-quarter financials for 2024 present a GAAP diluted EPS of $0.88, down 12%, however adjusted diluted EPS rose to $3.00, reflecting a 1.7% enhance. The corporate posted $14.46 billion in internet revenues, a 3.8% enhance, pushed primarily by its immunology, oncology, and neuroscience portfolios. The immunology portfolio, led by Skyrizi and Rinvoq, generated $7.046 billion in international revenues. Oncology and neuroscience additionally noticed features, with revenues of $1.687 billion and $2.363 billion, respectively, boosted by merchandise like Imbruvica, Venclexta, Botox Therapeutic, and Vraylar.

AbbVie not too long ago expanded its neuroscience portfolio by buying Cerevel, including belongings aimed toward treating schizophrenia, Parkinson’s, and main depressive dysfunction. The acquisition enhances AbbVie’s strategic targets, alongside current FDA approvals for Vyalev, a subcutaneous infusion remedy for superior Parkinson’s, and Botox Beauty for platysma bands, increasing its aesthetic functions. Moreover, AbbVie superior its international presence, receiving European approval for Skyrizi in ulcerative colitis and Tepkinly for lymphoma therapy, strengthening its immunology and oncology choices.

Trying ahead, AbbVie raised its 2024 adjusted EPS steerage to $10.90-$10.94, reflecting confidence in its long-term development. The corporate additionally introduced a 5.8% dividend enhance beginning February 2025. CEO Robert A. Michael highlighted sturdy industrial efficiency and pipeline developments as key elements supporting these changes. AbbVie continues leveraging new acquisitions, regulatory approvals, and strategic partnerships to boost its portfolio and drive shareholder worth.

Progress Prospects

The main danger for international pharmaceutical producers is patent loss. When a selected drug loses patent, the market is usually flooded with competitors, particularly for the world’s top-selling merchandise.

AbbVie’s greatest danger is the competitors about to hit its flagship drug, Humira. This multi-purpose drug is used to deal with a wide range of situations, together with rheumatoid arthritis, plaque psoriasis, Crohn’s illness, ulcerative colitis, and extra.

Humira as soon as generated over half of AbbVie’s annual gross sales. Lack of patent exclusivity is a major overhang—AbbVie expects its whole gross sales to say no in 2023 in consequence. On the identical time, AbbVie additionally expects to return to gross sales development in 2025, with excessive single-digit annual development via the tip of the last decade.

Luckily, the corporate ready for the lack of patent exclusivity on Humira by investing closely in new merchandise and acquisitions to spice up its development. For instance, Rinvoq and Skyrizi are two key merchandise that signify long-term development catalysts.

Supply: Investor Presentation

AbbVie additionally accomplished the $63 billion acquisition of Allergan. Allergan’s flagship product is Botox, which diversifies AbbVie’s portfolio by exposing it to international aesthetics.

We anticipate 5% EPS development for AbbVie over the following 5 years, reflecting the steep patent cliff dealing with Humira. We imagine the expansion outlook will enhance when the Humira overhang is gone, however there may be uncertainty surrounding AbbVie’s skill to beat that with new merchandise.

Aggressive Benefits & Recession Efficiency

Crucial aggressive benefit for AbbVie and any pharmaceutical firm is its patent portfolio. Pharmaceutical giants have to spend closely to develop new medication and therapies, when one in every of their blockbusters loses patent safety.

AbbVie has over 80 medical packages. It has a number of development alternatives to switch Humira, significantly within the therapeutic areas of immunology, hematology, and neuroscience. The results of its important funding in R&D is a well-stocked pipeline.

AbbVie was not a standalone firm over the last monetary disaster, so there isn’t a recession observe file. Nevertheless, since sick individuals require therapy whatever the economic system’s energy, it’s extremely seemingly that AbbVie would proceed to carry out effectively throughout a recession.

AbbVie’s earnings are more likely to decline considerably in a recession, however the dividend ought to stay safe. AbbVie has a projected dividend payout ratio of ~57% for 2024.

Valuation & Anticipated Returns

AbbVie is predicted to generate adjusted EPS of $10.92 for 2024 on the midpoint of steerage. At this EPS stage, the inventory at the moment has a price-to-earnings ratio of 17.4.

Our honest worth estimate for AbbVie is a price-to-earnings ratio of 12, that means the inventory is over-valued right this moment. A declining P/E a number of may scale back shareholder returns by roughly 7% per 12 months over the following 5 years.

As well as, we anticipate annual earnings development of 5% via 2029.

Lastly, the inventory has a present dividend yield of three.3%. Given these inputs, we anticipate annual returns of 1.3% per 12 months over the following 5 years, making AbbVie inventory a promote.

Remaining Ideas

AbbVie is a really high-quality enterprise, with a powerful pharmaceutical pipeline and development potential. Additionally it is a shareholder-friendly firm that returns extra money circulate to traders via inventory buybacks and dividends.

AbbVie faces a major problem in changing misplaced Humira gross sales because it faces competitors within the U.S. and Europe. This is the reason we have now pretty low assumptions for the corporate’s future EPS development and honest worth P/E a number of.

Nonetheless, the corporate has constructed a big portfolio of recent merchandise that ought to preserve its development intact. AbbVie will even be capable to generate further development from the acquisition of Allergan.

Nevertheless, the low anticipated returns make the inventory a promote.

Moreover, the next Certain Dividend databases include essentially the most dependable dividend growers in our funding universe:

The Dividend Champions: Dividend shares with 25+ years of dividend will increase, together with these that will not qualify as Dividend Aristocrats.
The Dividend Kings: thought-about to be the final word dividend development shares, the Dividend Kings record is comprised of shares with 50+ years of consecutive dividend will increase

In the event you’re in search of shares with distinctive dividend traits, think about the next Certain Dividend databases: