AbbVie (ABBV) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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) is headquartered in North Chicago, and is in the Medical sector. The stock has seen a price change of 6.93% since the start of the year. Currently paying a dividend of $1.18 per share, the company has a dividend yield of 4.99%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.57%, while the S&P 500's yield is 1.68%.
Looking at dividend growth, the company's current annualized dividend of $4.72 is up 10.3% 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 22.18%. 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. Right now, AbbVie's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.
ABBV is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $10.46 per share, representing a year-over-year earnings growth rate of 17%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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