My #1 Dividend Stock
Marc Lichtenfeld, Chief Income Strategist
Due to COVID-19, the market has provided us with some incredible opportunities. Quality companies have gone on sale – some with much higher yields than normal.
Today, we have the chance to purchase a great company and capture a splendidly high dividend.
The healthcare sector has long been one of my favorite sectors to invest in.
That continues to this day, and it has nothing to do with COVID-19.
Over the next six years, global spending on pharmaceuticals is expected to increase from $904 billion to $1.4 trillion.
You definitely want exposure to healthcare stocks right now and over the long term.
AbbVie (NYSE: ABBV) is my favorite large cap pharma company for capital gains and my top dividend stock for a lifetime of income.
AbbVie alone will likely have at least five drugs that generate revenues of more than $1 billion each this year… And it will perhaps have another two very shortly.
Humira is the bestselling drug in the world. The medication for arthritis, psoriasis, Crohn’s disease and graft-versus-host disease generated more than $20 billion in sales in 2020.
Cancer fighter Imbruvica scored more than $5 billion in revenue last year.
And AbbVie’s recently acquired Botox sold more than $1 billion in 2020, as did cancer drugs Venclexta and Skyrizi.
The big knock on AbbVie is that Humira is off-patent outside the United States and will lose patent protection within the U.S. in 2023.
But AbbVie constantly innovates in order to make up for the loss of Humira…
Skyrizi is expected to be a more attractive alternative to Humira in the treatment of psoriasis, as it requires fewer injections per year.
Rinvoq (for arthritis) is also forecast to be a blockbuster.
AbbVie recently announced positive Phase 3 data for atogepant for the treatment of migraine headaches.
The company also just teamed up with Harvard University to develop treatments for viruses, with an emphasis on coronaviruses.
A Massive Perpetual Dividend Raiser
For 2021, AbbVie raised its quarterly dividend another 10.2% from $1.18 per share to $1.30 per share. That $5.20 annual dividend provides a 4.88% yield. Investors who bought in when I first recommended the stock in 2016 in The Oxford Income Letter now enjoy an 8.4% yield.
The company has raised its dividend every year since it spun off from Abbott Laboratories (NYSE: ABT) in 2013.
It has raised its dividend by an astonishing 15% compound annual growth rate. Increasing the dividend by 225% since 2013.
I expect AbbVie to continue to boost its payout to shareholders by double digits for the foreseeable future.
During the past 12 months the company generated nearly $13 billion in free cash flow while paying out a little more than $6 billion in dividends.
It accomplished this despite the negative impacts of COVID-19 – particularly on its Allergan beauty products franchise, whose products are widely used aesthetically. (Botox is the franchise’s bestseller.)
A recession may impact Botox sales, but few people are going to stop taking their Humira for Crohn’s disease, their Tarka for high blood pressure or their Kaletra for HIV because economic times are tough.
The stock trades at just eight times 2021’s forecast earnings for a very low price-to-earnings to growth (PEG) ratio of 1.2.
Some of Wall Street’s heavy hitters must think it’s cheap too. Vanguard owns more than 8% of the shares and BlackRock owns nearly 7%.
Renaissance Technologies, one of the most successful hedge funds in history, owns more than 13 million shares.
Since AbbVie has been in our portfolio, it has outperformed the S&P 500. I expect that outperformance to continue for years to come, helped by that juicy yield.
If you don’t yet own AbbVie, now’s the time to grab some shares.
Action to Take: Buy AbbVie (NYSE: ABBV) at the market. Place a 25% trailing stop.
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Last Updated: January 2021