Friday, February 11, 2011

Abbott Laboratories (ABT) Dividend Stock Analysis

Abbott Laboratories engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. The company is a dividend aristocrat which has increased distributions for 38 years in a row.

Over the past decade this dividend stock has delivered an annualized total return of 3.10% to its loyal shareholders.

The company has managed to deliver an average increase in EPS of 8.40% per year since 2000. Analysts expect Abbott Laboratories to earn $4.17 per share in 2010 and $4.66 per share in 2011. This would be a nice increase from the $3.69/share the company earned in 2009. The growth would come from increase in sales in rheumatoid arthritis and psoriatic arthritis drug Humira, cholesterol treatment drug Niaspan and the Xience drug eluting stent. The company’s growth is also dependent on the successful integration of the pharmaceuticals unit that it purchased from Solvay for $6.2 billion in 2010, which included Abbott with the cholesterol drugs Tricor and Trilipix.

The company has a high return on equity, which has remained above 20%, with the exception of a brief decrease in 2001 and 2006. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment in US dollars has increased by 8.60% per year since 2000. A 9% growth in distributions translates into the dividend payment doubling every eight years. If we look at historical data, going as far back as 1986, we see that Abbott Laboratories has actually managed to double its dividend every six years on average.


Over the past decade the dividend payout ratio has remained above 50% Only in the past few years has the dividend payout ratio remained below 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently, Abbott Laboratories is attractively valued at 15.60 times earnings, yields 3.80% and has a sustainable dividend payout. In comparison Johnson & Johnson (JNJ) yields 3.60% and trades at a P/E of 12.70. I would continue monitoring Abbott Labs and will consider adding to a position in the stock on dips.

Full Disclosure: Long ABT

Relevant Articles:

4 comments:

  1. I like Abbot. Recently they bought out a pharma company in India making their presence felt in emerging markets.

    This is a good buying opportunity.

    ReplyDelete
  2. As always well explained,Thanks for the information, it is really helpful. By the way "Schlumberger Stock To Go Ex-dividend Monday " Does this mean it would be time to drop this from the dividend portfolio.

    ReplyDelete
  3. LOVE ABT. Got a few shares in my RRSP that pay nice divis every quarter. I wish I had more cash, I'd be buying tons more ABT stock. So VERY cheap right now.

    Very good analysis, as always.

    ReplyDelete
  4. Let's hope the recent acquistions will help this company move it's stock price as well. Ten years ago it was trading at about what it is now.

    ReplyDelete

Questions or comments? You can reach out to me at my website address name at gmail dot com.

Popular Posts