Why Wall Street Can't Get Enough of This Dividend King
Yahoo Finance ·
AbbVie ( ABBV +0.95% ) was spun off from Abbott ( ABT +2.29% ) in 2013. That's an important fact to keep in mind when you look at AbbVie's Dividend King status. Technically, it hasn't increased its dividend annually for 50 years because it hasn't existed as a stand-alone company for 50 years. But don't let that fact dissuade you from looking at this much-loved dividend stock. Here's what you need to know. While AbbVie inherited its status as a Dividend King from its former parent, Abbott, it has increased its dividend every year since the spin-off. It is clear that AbbVie understands how important dividends are to its shareholders. Meanwhile, today's yield is quite attractive at 2.7%. For comparison, the S&P 500 Index 's ( ^GSPC +0.05% ) yield is only around 1%, and the average pharmaceutical stock's yield is just 1.5%. The problem is that the payout ratio is a shockingly high 330% right now. But that's not necessarily the best gauge here. AbbVie generates high, recurring cash flows from drug sales. Since dividends are paid from cash flow, the earnings picture isn't a complete view of a company's dividend-paying ability. Looking at cash flows, AbbVie's cash dividend payout ratio is around 60%. That suggests the dividend is on much firmer ground than it appears to dividend investors at first. Meanwhile, the balance sheet is investment-grade rated, so the company is financially strong.
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