AbbVie (ABBV) is a pharmaceutical giant that was spun off from Abbott Laboratories (ABT) in 2013. This has clearly worked to the benefit of shareholders, as AbbVie stock has more than tripled since being spun off, observes Bob Ciura, income expert and editor of Sure Retirement.
Today, AbbVie is a diversified pharmaceutical manufacturer. Its flagship product is Humira, which is the world’s top-selling drug. Humira is now facing biosimilar competition in Europe, and will lose patent exclusivity in the U.S. in 2023.
Fortunately, AbbVie has prepared for this outcome by investing heavily in new products, both internally and through acquisitions, to replenish its drug pipeline.
This has succeeded in providing AbbVie with continued growth. In the 2020 third quarter, AbbVie reported $12.9 billion in revenue, up 52% year-over-year thanks in large part to the $63 billion acquisition of Allergan, maker of Botox and many other successful products.
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Separately, new products have boosted growth such as Imbruvica, which reported 9% sales growth last quarter. Earnings-per-share rose 21% from the previous year’s quarter.
Even with the coronavirus pandemic, 2021 is set to be another strong year for AbbVie, as the company expects full-year adjusted earnings-per-share in a range of $10.47 to $10.49. We expect 3% annual earnings-per-share growth moving forward.
AbbVie qualifies as a Dividend Aristocrat due to its history under former parent company Abbott, which is also a Dividend Aristocrat. AbbVie has continued to raise its dividend since the spin off, including a hefty 10% raise in October.
AbbVie shares currently yield 5%. The combination of EPS growth and dividends along with a small boost from an expanding valuation multiple are expected to deliver total returns above 9% per year.
(Disclosure: The author is long ABBV.)