- Oops!Something went wrong.Please try again later.
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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
Based in North Chicago, AbbVie (ABBV) is in the Medical sector, and so far this year, shares have seen a price change of 4%. The drugmaker is currently shelling out a dividend of $1.3 per share, with a dividend yield of 4.67%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.4% and the S&P 500's yield of 1.27%.
In terms of dividend growth, the company's current annualized dividend of $5.20 is up 10.2% from last year. Over the last 5 years, AbbVie has increased its dividend 5 times on a year-over-year basis for an average annual increase of 21.31%. 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 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ABBV for this fiscal year. The Zacks Consensus Estimate for 2021 is $12.51 per share, with earnings expected to increase 18.47% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
To read this article on Zacks.com click here.