Savvy investors, including billionaires, are drawn to dividend-paying stocks for their potential to outperform the broader market over time. A 50-year study of the S&P 500 index reveals that dividend payers delivered an average annual return of 9.17%, significantly outpacing their non-dividend-paying counterparts, which averaged a mere 4.27% annual return.
Recently, billionaire investors Israel Englander and Igor Tulchinsky snapped up shares of AbbVie, a pharmaceutical giant with a long history of paying dividends. Englander’s Millennium Management fund boosted its AbbVie holdings by a staggering 682%, while Tulchinsky’s Worldquant Millennium Advisors opened a new position with a significant purchase.
So, what makes AbbVie an attractive investment opportunity? For starters, the company boasts a portfolio of blockbuster drugs, including Skyrizi, Rinvoq, and Qulipta, which are driving sales growth. Skyrizi, an injection for treating psoriasis, Crohn’s disease, and ulcerative colitis, has seen sales skyrocket 45% year over year, with a patent-protected exclusivity period that extends until 2033. Rinvoq, a tablet for treating arthritis, has already generated an annualized $5.7 billion in sales, while Qulipta, a pill for preventing chronic migraines, has seen sales jump to an annualized $600 million.
AbbVie has consistently raised its dividend payout at an impressive 13.1% average annual rate since spinning off from Abbott Laboratories in 2013. With a current yield of 3.2%, investors can expect a growing stream of income over time.
However, there are risks to consider. AbbVie’s sales growth has slowed, with total sales increasing by just 2.6% year over year in the first half of 2024. The company also faces declining sales of its former lead product, Humira, which is facing competition from lower-cost biosimilar versions. Imbruvica, another blockbuster drug, is losing ground to a next-generation competitor.
Despite these challenges, AbbVie’s valuation appears reasonable, with a price-to-earnings ratio of 17.9 times the midpoint of management’s earnings estimate for 2024. With its strong pipeline of growth drivers and potential for a return to rapid growth, AbbVie looks like an attractive investment opportunity for everyday investors.
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