As part of our low-cost investment challenge for 2025 with just £10 / week, we are thrilled to present our second stock selection for the “£10-a-week Dividend Pie”. Remember that were purchasing our first dividend stock last week. Our focus remains on identifying high-quality, dividend-paying stocks to build a robust portfolio that generates steady passive income. This week, we turn our attention to AbbVie Inc. (ABBV).
Why AbbVie?
AbbVie Inc. is a global biopharmaceutical company renowned for its innovative therapies in immunology, oncology, neuroscience, and more. Since its spinoff from Abbott Laboratories in 2013, AbbVie has become a dividend powerhouse, demonstrating a steadfast commitment to rewarding shareholder for more than 10 years in consecutively. As of December 31st, 2024, AbbVie’s stock is trading at approximately $176.20, with an attractive annual dividend yield of around 3.72%.
Dividend Overview
The “£10-a-week Dividend Pie” aims to focus on companies with strong dividend fundamentals. We can say AbbVie is a prime example of this, so let’s review their dividends:
- Current Dividend: AbbVie pays an annualised dividend of $6.56 per share, distributed quarterly. This equates to a yield of approximately 3.72% (based in current price), and we are happy to see that dividend is well above the average for the S&P 500.
- Consistency: As mentioned before, AbbVie has raised its dividend consistently for over 10 consecutive years since its inception.
- Payout Date: The upcoming ex-dividend date is January 15, 2025, with a payment date of February 15, 2025. Purchasing AbbVie shares before the ex-dividend date ensures eligibility for the next dividend payment. If you don’t know or remember how dividend works, we did a guide to learn key dates for dividend stocks.
Dividend Growth
This our favourite metric when looking for dividend stocks. AbbVie’s dividend growth has been impressive. Over the last decade, the company has increased its dividend at a compound annual growth rate (CAGR) of 16.5%! That is a good proof of its financial strength and commitment to returning value to shareholders. Despite macroeconomic challenges, AbbVie has consistently prioritised dividend growth, making it an essential for any dividend-focused portfolio.
Dividend Security
Nothing is secure on this life, but we could say that AbbVie’s dividend security is supported by:
- Strong Cash Flow: The company generates substantial free cash flow from its diverse portfolio of high-margin drugs, including its flagship product, Humira, and newer launches such as Skyrizi and Rinvoq.
- Diversification: While Humira remains a significant contributor, AbbVie has successfully diversified its revenue streams, reducing dependency on any single product.
- Commitment to Shareholders: AbbVie’s leadership has consistently demonstrated a commitment to returning capital to shareholders through dividends and share repurchases.
Risks and Considerations
No investment is without risks, everyone knows that, and AbbVie is no exception. Key considerations include:
- Patent Expirations: Humira, AbbVie’s blockbuster drug which is the most significant contributor of their earnings, faces ongoing biosimilar competition, particularly in international markets, so they could see their earnings reduced soon.
- Regulatory Risks: As a biopharmaceutical company, AbbVie operates in a highly regulated industry, which can impact product approvals and pricing.
- Debt Levels: The acquisition of Allergan in 2020 increased AbbVie’s debt load, though the company has made significant strides in deleveraging since.
Despite these challenges, AbbVie’s robust pipeline and strategic initiatives provide a solid foundation for sustained growth.
Why AbbVie Fits the £10-a-Week Challenge
AbbVie’s high dividend yield, consistent growth, and strong fundamentals make it an excellent candidate for our dividend-focused investment pie, and it is considered a good quality stock. Its resilience and commitment to shareholder returns align perfectly with our goal of building a diversified, income-generating portfolio. While risks exist, AbbVie’s strong cash flows and diversified product portfolio position it as a compelling choice for dividend investors.
As always, remember that investing in individual stocks carries risks. Consult a financial advisor to ensure your investment strategy aligns with your goals and risk tolerance. This challenge represents our personal investment journey and is not financial advice.
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