This Dividend Feels Illegal 🚫

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THIS DIVIDEND FEELS ILLEGAL 🚫 

If Warren Buffett and The Rock had a baby, it would probably look a lot like $ABBV ( ▼ 1.12% ) . Strong, consistent, dependable. And always cutting you a check every quarter.

This isn’t your grandpa’s sleepy dividend payer. AbbVie is a Dividend King with over 50 years of hikes under its belt (counting its Abbott Labs days). But unlike most Kings that toss out token raises, AbbVie still hands out meaty pay bumps.

And right now, it’s flashing a rare combo that dividend growth investors drool over:

• A 3% yield

• ~7% annual dividend growth over the last 5 years

• Strong fundamentals with a conservative 55% payout ratio

• Plus, some juicy growth drivers in the pipeline

Yep. AbbVie’s basically the golden retriever of pharma stocks. Loyal, hardworking, and pays you back with tail wags dividends.

Dividend Royalty (And Millionaire-Makers)

AbbVie split from Abbott Labs in 2013. Since then, it’s pumped its dividend up by 310%. That’s a monster raise in just over a decade.

Go back even further and you get legendary stories like Grace Groner — Abbott secretary in the 1930s, bought 3 shares for $180, never sold. By the time she passed in 2010? That tiny investment had ballooned into $7.2 million.

That’s the power of sticking with a compounding machine. And AbbVie’s track record shows it’s still in the game.

Don’t Let The Payout Ratio Fool You

At first glance, the payout ratio looks terrifying: it shot from 80% in late 2022 to 308% now. But that’s just accounting noise from one-off impairments.

The real picture? In Q2, AbbVie delivered adjusted EPS of $2.97. The dividend that quarter was $1.64. That’s a comfortable 55% payout ratio.

And the growth’s been steady:

• 5 years ago, quarterly dividend = $1.18

• Now = $1.64

• That’s a 39% increase (avg. 6.8% a year)

Not Microsoft-level 10%+ hikes, but here’s the trade off: Microsoft trades at sky-high multiples. AbbVie gives you nearly the same dividend growth plus a chunky yield today.

Growth Engines: Skyrizi & Rinvoq

Humira, AbbVie’s once-golden goose, lost U.S. patent protection in 2023. It’s still kicking with $1.18B in sales, but the real stars now are Skyrizi and Rinvoq:

• Skyrizi: +62% growth

• Rinvoq: +41% growth

Add in:

• Neuroscience: +24%

• Oncology: slow but steady

• Aesthetics: actually declining (Botox isn’t saving the day this year)

Still, AbbVie grew revenues +6.5% YoY and EPS +12.1% YoY in Q2. Management even bumped full-year EPS guidance up to $11.88–$12.08 (midpoint: $11.98).

Pipeline looks solid too, with new trials showing promise. And you know what that means right? More ammo for dividends.

The October Dividend Hike

Circle your calendar. Every late October, AbbVie announces its annual dividend raise. Here’s the recent pattern:

• 2022: +$0.07 (4.7%)

• 2023: +$0.07 (5.8%)

• 2024: +$0.09 (5.8%)

This year? With stronger earnings and a 55% payout ratio, AbbVie’s got wiggle room. Expect something like a $0.10 bump, bringing the quarterly dividend to $1.74. That’s a 6.1% hike. Slightly juicier than last year, still well within safe territory.

Risks (Because Pharma Ain’t Easy)

AbbVie isn’t risk-free. Here’s what could bite:

• R&D & Acquisitions: Billions spent, and not every drug hits. Some duds are inevitable.

• Politics: U.S. drug pricing is always under the microscope. Tariff talk is heating up too (White House floated 100% tariffs on branded drugs unless manufacturing stays local).

• Currency: A strong dollar eats into overseas profits. Recently the weaker dollar helped, but FX is a wild beast.

• Competition: Generics and rival drugs are always nipping at the heels (RIP Humira’s monopoly).

Valuation Check

How does AbbVie stack up against peers $AMGN ( ▲ 0.17% ) and $GILD ( ▲ 1.93% ) ?

AbbVie’s the priciest on P/S and P/E, but still trading under 20x earnings. Compare that to consumer staples at 20–25x with worse growth.

Wall Street expects AbbVie to pump out 15% EPS growth annually for the next 5 years. Toss in the 3% dividend yield, and you’re looking at ~18% total annual returns. That’s been reality the last 5 years, and AbbVie could easily run it back.

Bottom Line

AbbVie isn’t just a Dividend King. It’s a Dividend King that still acts like it’s climbing the throne. Solid growth, conservative payout ratio, and a dividend hike tradition that feels as reliable as your morning coffee.

Even after a 153% stock price run in the last 5 years (20% CAGR before dividends), AbbVie still looks like a Strong Buy for dividend growth investors.

TL;DR

• AbbVie’s been hiking dividends for 50+ years → Dividend King status.

• 3% yield + ~7% annual growth = tasty combo.

• Growth engines: Skyrizi (+62%), Rinvoq (+41%), plus neuroscience (+24%).

• 2024 EPS guidance midpoint = $11.98. Payout ratio = 55%.

• October hike incoming: likely +$0.10 to $1.74 (6.1%).

• Risks: R&D duds, drug pricing politics, FX swings, generic competition.

• Valuation: P/E 18.3x, yield 3%. Analysts see 18% annual returns over 5 years.

• Strong Buy for dividend growth investors.