AbbVie's (NYSE:ABBV) Shareholders Will Receive A Bigger Dividend Than Last Year
AbbVie Inc.'s (NYSE:ABBV) dividend will be increasing from last year's payment of the same period to $1.48 on 15th of February. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.
Check out our latest analysis for AbbVie
AbbVie's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, AbbVie's dividend made up quite a large proportion of earnings but only 48% of free cash flows. This leaves plenty of cash for reinvestment into the business.
EPS is set to grow by 6.7% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 82% - on the higher side, but we wouldn't necessarily say this is unsustainable.
AbbVie Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.60 in 2012 to the most recent total annual payment of $5.92. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that AbbVie has grown earnings per share at 13% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
We Really Like AbbVie's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for AbbVie that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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