Top Picks 2016: AbbVie

01/12/2016 7:00 am EST


Ingrid Hendershot

Founder and President, Hendershot Investments, Inc.

Our Top Pick for income investors is a company that was formed in 2013 following separation from Abbott Laboratories, explains Ingrid Hendershot, money manager and editor of Hendershot Investments.

AbbVie (ABBV) has a pipeline of promising new medicines with the potential to deliver nearly $30 billion in sales from the expected launch of more than 20 new products through 2020.

HUMIRA is currently the company's leading biologic therapy, a product focused on treating a variety of autoimmune diseases.  

AbbVie outlined long-term financial objectives which position the firm for strong performance. AbbVie expects to deliver double-digit adjusted EPS growth on average through 2020 with total company sales of about $37 billion by 2020.

The company expects significant margin expansion, targeting 2020 operating margin greater than 50% with an average of 100-200 basis points of improvement per year.

Management is committed to returning cash to shareholders through a strong and growing dividend. The company announced a 12% increase in the dividend for fiscal 2016. The dividend currently yields a healthy 4.0%.

Year-to-date through September 30, 2015, the company has also repurchased $6.25 billion of its shares. AbbVie's outlook for 2016 adjusted EPS is in the range of $4.90-$5.10, reflecting strong double-digit growth.

Long-term investors may want to inject AbbVie into their portfolio, a high-quality biotech firm with double-digit growth and a healthy dividend. Buy.

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