The population is aging at warp speed. A combination of longer lives and lower fertility rates have made the US and global populations older than ever before, forecasts Tom Hutchinson, a leading income expert and editor of Cabot Dividend Investor.
About a third of the US population is already over 50, and they won’t be getting any younger. In fact, the fastest growing segment of the population is 65 and older as an average of 10,000 baby boomers turn 65 every single day.
What does this mean? It means you’re likely to get stuck behind drivers who pull out onto the middle of the road and become stumped. But it also means that healthcare will be a booming growth industry, as older people simply require a lot more of it. That’s a beautiful thing because the sector is already defensive and adding the growth quotient makes it irresistible.
There’s a lot of ways to play healthcare. You can invest in everything from high-flying biotechnology companies to the more stodgy big pharmaceutical companies. I like a company that combines both — the stability and high dividend yield of big pharma and the rapid growth of biotechnology.
AbbVie (ABBV) is a US-based biopharmaceutical company specializing in cutting edge small molecule drugs. The company was spun off from pharmaceutical giant Abbott Labs (ABT) in 2013, but has already eclipsed its former parent company in size and is now the eighth largest drug company in the world.
Since the stock’s IPO on December 21, 2012 it has provided a phenomenal average annual return of 20%. An initial $10,000 investment would now be worth over $31,000, with dividends reinvested. The dividend has more than doubled since 2014 and ABBV now yields a big fat 5%.
The rapid growth has been achieved from its blockbuster biologic auto immune drug Humira, which is the world’s number one drug by far with annual sales of over $20 billion. Humira accounts for over 50% of sales and faces increasing competition that will erode market share. However, AbbVie has a spectacular pipeline of new drugs that should more than offset the slippage.
According to market research firm EvaluatePharma, Abbvie has the second most valuable clinical pipeline across all of biopharma. It has 20 new products slated for launch by 2020 and 15 drugs and treatments that are already currently already in phase 3, the last step before the approval process.
Earnings over the next five years are expected to be even better than the last five. With a yield of 5.0%, the stock has a spectacular track record and offers more growth and a higher dividend than any other big drug company.
