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Why this pharmaceutical company is worth a look. . . 04/14/16

Why this pharmaceutical company is worth a look. . .


Buying and selling—which is speculation, not investing—is based on “playing” the stock market. You are gambling that the price of a stock will rise, and you're continually buying and selling on that assumption (paying commissions and taxes with each transaction).

 

Investing requires a longer-term perspective where daily market fluctuations are only incidental. But that’s not the way financial institutions and the media see it. How would they support their lifestyles? It’s not even a concept that sits well with the SEC that insists on a discussion of the short-term results achieved by a stock or a portfolio.

 

Our passion is to confront the prevalent investing ideology by making a more logical approach appealing and easy to implement. We’d like people to understand that there are alternatives to the traditional method of investing through a broker.

 

In fact, the alternative method is not just an inexpensive alternative. The alternative method that we advocate—direct investing through company-sponsored direct investment plans (also known as dividend reinvestment plans and DRIPs)—is much more than that. By investing directly, several risk-reducing strategies become available to even the smallest investor.

 

I’ll explain: Two of the most well tested risk-reducing strategies are wide diversification of holdings (don’t put all your eggs in one basket) and dollar-cost averaging (don’t invest all at once when it might be the wrong time based on the market or based on the stock). But those strategies, while broadly followed by affluent investors are pie-in-the-sky for middle class investors who can invest maybe as much as $2,000 a year. Those people are basically locked out of such strategies.

 

That’s what we thought until, in 1984, we discovered dividend reinvestment plans, which we now refer to as direct investment plans because the original name might leave the impression that only the dividends are investable. In fact, such plans make it possible to invest cash amounts into an account held on the company’s books in the customer’s name (not street name). Investment amounts can be as little as $25 or $50 and it only takes a single share of the company stock to qualify to enter the plan.

 

Investing through DRIPs is, by far, the best strategy we’ve found for long-term investors to create a diversified portfolio of top-rated dividend-paying stocks and fund their accounts with amounts that are realistic. For middle class individuals who want to create wealth for their retirement, this is one of the most viable, if not the only efficient way, to do so.

 

There are nearly 1,300 U.S. companies that offer DRIPs. Many of them are shareholder-friendly companies that have paid dividends for many consecutive years and have even steadily increased their dividends. 

 

At Moneypaper, we are not in the business of making specific stock recommendations or projecting daily market predictions. That’s because we believe that real wealth is built by approaching the market logically. That is, by devising a strategy that will work over the long term and sticking with it. One or two “hot” stocks just won’t cut it—even if we thought that we could recommend a specific stock for a specific time period with 100% surety.

 

With this, you should understand that any stock selections we provide should not be viewed as a stock pitch. Our purpose in highlighting a specific company is to point out that the company offers a DRIP and to suggest that it is “worth a look” for inclusion in your well diversified portfolio because the company meets the following criteria: 

 

1.The company is a solidly established industry leader;

2.The company is shareholder-friendly with a long history of paying, and even raising, regular dividends; and

3.The company does not charge a fee for investing through its DRIP.

 

We believe that the chances are good that the companies that we profile in this space will continue to provide the products or services that have brought them acclaim in the marketplace and allowed them to consistently pay a dividend to their shareholders.

 

Our current Special is… AbbVie Inc. (ABBV). AbbVie was spun off by Abbott Labs at the start of 2013 and is a biopharmaceutical company engaged in the development of pharmaceutical products worldwide. Its products include a range of adult and pediatric pharmaceuticals, including HUMIRA, which treats various autoimmune diseases; Synthroid, used in the treatment of hypothyroidism; AndroGel, a daily testosterone replacement therapy; Creon, a pancreatic enzyme therapy; Kaletra, a prescription anti-HIV medicine; and Lupron, a treatment for prostate cancer.

 

The company also offers products to reduce cholesterol, release niacin, protect infants from respiratory disease, and treat Parkinson's disease. According to Yahoo! Finance, the consensus of 20 analysts is that AbbVie's annual sales will top $25 billion in 2016 and the company should earn about $5.02 per share this year and $5.97 in 2016, compared with $4.29 in 2015. The $2.28-per-share annual dividend (up from an initial rate of $1.60) provides a 4.1% yield.

 

 

What makes AbbVie particularly attractive is its strong position in market leading drugs like HUMIRA, which has been approved for various conditions beyond rheumatoid arthritis, along with a strong pipeline for new formulations.

 

For investors, the growing earnings and dividends offer ample reward while they wait for more stock price appreciation. The company benefits from worldwide markets for its products, many of which address the needs of a growing population here and abroad. The 4%+ dividend provides excellent fodder for reinvestment, accentuating the potential for compounding over the long term and, combined with a no-fee DRIP that invites dollar-cost averaging, is an ideal investment vehicle.

 

Click Here to see a complete listing of all companies currently offering a no-fee DRIP.