AbbVie (ABBV) is one of the world’s largest biopharmaceutical companies based on its market cap of well over $100 billion and sales of more than $30 billion annually, asserts Ben Reynolds, editor of Sure Retirement.
AbbVie was created in 2013 when it was spun-off from Abbott Laboratories (ABT). The company has grown its adjusted earnings-per-share each year since it was spun off. From fiscal 2013 through fiscal 2017 adjusted earnings-per-share have compounded at a strong 15.6% rate.
While AbbVie’s business results have been excellent, the market has not fully appreciated the stock. AbbVie generates nearly 60% of its revenue from the drug Humira.
Humira has already begun to fall off the ‘patent cliff’, but results have been much better than previously thought. In fact, Humira sales are still growing as AbbVie both vigorously defends its patent position and continues to find new use cases for Humira.
AbbVie’s management is doing more than defending and growing Humira. The company has invested heavily in its new product pipeline, spending between $4 billion and $5 billion a year on research and development in fiscal 2015 through fiscal 2017. The company is also engaging heavily in share repurchases.
To that end, AbbVie recently announced a $5 billion increase to its share repurchase plan, which amounts to around 3.8% of AbbVie’s current market cap.
The company’s management clearly believes the stock is undervalued right now and has the means to engage in significant share repurchases. In addition to share repurchases, AbbVie also returns around 45% of earnings to shareholders via dividend payments.
The pessimism surrounding AbbVie has pushed its dividend yield to around 5%. The company’s combination of a high yield, low valuation, and solid growth prospects makes AbbVie a strong choice for any investor looking for current income, income growth, and exposure to the pharmaceutical industry.
