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AbbVie Inc. (ABBV)

 

Originated as a spin-off of Abbott Laboratories in 2013, AbbVie Inc. (ABBV) is a Biopharmaceutical company that discovers, develops, manufactures, and sells pharmaceutical products in the United States and international. The company is headquartered in North Chicago, Illinois. Its current total market capitalization of $169 billion makes ABBV a mega capitalization stock (a mega-cap stock has a market capitalization value of more than $100 billion) and its long history of consistent revenues and earnings growth makes it a solid company.


It is considered a well-established and diversified business with a durable competitive advantage over its rivals, which also enjoys a solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $10.45 per share this year, up from $8.94 per share last year, and to go to about $12.11 per share next year. AbbVie has paid dividends to investors since its creation in 2013, and has increased its payments for six consecutive years. During the past five years it has increased its dividends at an average annual rate of 19%, and its quarterly payment of $1.18 per share currently provides a yield of 4.93%.


The value of dividends reinvestment: A hypothetical investment in AbbVie has grown cumulatively (including dividends reinvested) 289.58% since its creation in 2013. The same investment has grown only 185.36% during the same period of time, excluding dividends. During the same period, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Admiral (VFIAX) has grown cumulatively 189.80%, including dividends reinvested. According to the data and calculations from the financial website dqydj.com (don’t quit your day job), a periodic monthly investment of $100 in ABBV since 2013 would has grown to $16,566, including dividends reinvested.


Its current Price to Earnings ratio (P/E --a measure of valuation) of 20.96 is 15.3% below the US Market Index (the forward P/E ratio is 9.20), its Price to Cash Flow of 9.92 is 30.7% below the index, and according to Morningstar, the stock is trading at a 1.3% discount. Technically (from the chart’s perspective) ABBV also looks attractive, trading 23.9% below its all-time high), while it is forming a long price consolidation pattern between $101 and $62 approximately, in which $62 is acting as a strong technical support level.


The actively managed mutual funds American Funds Capital Income Builder and American Funds American Mutual are major shareholders of ABBV, holding 1.28% and 0.61% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed by Moneypaper Advisors, the MP 63 Fund (DRIPX). ABBV’s main competitors are Eli Lilly and Co. (LLY) and Merck & Co. Inc. (MRK). Its 5-year Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 0.75, so the stock is 25% less volatile than the Market.


Best and worst years since its creation in 2013: Its best year was 2013, in which ABBV returned, including dividends, 59.3%. On the flip side, its worst year was 2015, when the stock declined 6.4%. ABBV’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, safekeeping, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this company might be an appropriate holding for investors who wish to build a holding over the long term.


Disclosure: Mario Medina has no position in AbbVie Inc., and has no plans to initiate any position in the immediate future. However, the author is the co-manager of the MP 63 Fund (DRIPX), which does hold a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with ABBV and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice. Past results illustrated in the article are for reference and educational purpose only and do not guarantee future performance.