All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
AbbVie in Focus
AbbVie (ABBV) is headquartered in North Chicago, and is in the Medical sector. The stock has seen a price change of -11.88% since the start of the year. Currently paying a dividend of $1.07 per share, the company has a dividend yield of 5.27%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.68%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.28 is up 19.2% from last year. In the past five-year period, AbbVie has increased its dividend 5 times on a year-over-year basis for an average annual increase of 18.92%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. AbbVie's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ABBV for this fiscal year. The Zacks Consensus Estimate for 2019 is $8.68 per share, with earnings expected to increase 9.73% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious 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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AbbVie Inc. (ABBV) : Free Stock Analysis Report
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