Stock Analysis Pollie-style – ABBVie – 2019
Today I will do an analysis of a company that caught my eye after reading a couple of blogs. This company isn’t a Dividend Aristocrat. In 2013 it spun off from a well-known Dividend Aristocrat. So the company has a rather short stand-alone history.
For my analysis I use a lot of data from the Internet and from the company itself. But most data I get from the famous CCC-list, which was created by David Fish and is now maintained by Justin Law.
This analysis is on AbbVie Inc. (ABBV).
Company
From Wikipedia:AbbVie is an American publicly traded biopharmaceutical company founded in 2013. It originated as a spin-off of Abbott Laboratories. (ABT)
Can I explain this to a 10-year old? What Does This Company Do?
AbbVie is a biotechnology company focused on developing and selling drugs for some of the worlds most horrible diseases.
Pollie-code Analysis
Dividend Aristocrat: ABBV is paying Dividend for 7 years in a row; therefore it is a Dividend Challanger on the CCC-list. However, it is a spin-off of Abbott Laboratories, which is a dividend aristocrat with a long track record of paying dividends dating back to 1924. This company has also raised its dividend for over 40 consecutive years. Because ABBV is a spin-off of ABT, I think ABBV can be classified as a Dividend Aristocrat. Therefore it is a pass!
Dividend Yield > 2.5%: The dividend Yield of ABBV is 5.35%. This is above the industry average of 2.9%. And it is above its 5 years average (3.23%). The Yield is above the requirements of the Pollie-Code, and therefore it passes the second Pollie-code.
Dividend payout <70%: The dividend payout is roughly 50%. This is below the maximum ratio. This’s what a DGI wants. So also passed for this point.
DGR 1 year > 0%: The dividend growth rate for 1, 3 and 5 years are 40.2, 21.1 and 17.5. With a 3-years average around 21% this looks very good! And it is above the requirements of the Pollie-code, so it is a pass.
P/E-ratio < 15: This is an easy metric that is well documented. It can be used as a quick metric to identify stocks that may potentially be undervalued. I use this to identify stocks that may be discounted compared to the overall stock market. ABBV has a current P/E ratio of 16.53. The industry average is 23.77. The P/E ratio is below the industry average. And it is lower that its 5-years average (26.83). But because the P/E ratio is higher than the requirements of the Pollie-Code it is a fail. But it is getting close 🙂
EPS > 0: The EPS is 5.08. So ABBV passed the sixth Pollie-Code
ROE > 10%: Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders has invested. The current ROE is more 400%. This is above the requirements from the Pollie-Code. Therefore it is a pass.
Market Cap. > 100M: No problem at this point. The Market cap. Is more than $ 128.780 Mil. You guested it already: Another pass.
Chowder Rule > 12: Named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained. The current Chowder rule is 22.9. So it is another pass for ABBV.
Stock price 52wk high-25%: The 52 wk. high and low are: 120.51 and 76.53. This means that ABBV will be in my buying zone when the stock price is below 109.51 ((120.51-76.53)*0.75 + 76.53). At this moment ABBV is trading for $80.51. Therefore it is a pass on the Pollie-Code.
Beta: I think it’s important to have low Beta stocks in my portfolio. This helps to have a stable income all the time, even when the market has a rapid decline. The Beta for ABBV is 1.31.
Conclusion
When I look at my analysis, AbbVie has passed nine out of ten requirements from the Pollie-code! This is great! Only at the P/E ratio is ABBV failing. But hey, you have to pay for quality.
AbbVie does not have a long history, but during the last couple of years the company operated very successfully. AbbVie’s explosive earnings-per-share growth started shortly after the company was spun off from Abbott Laboratories in 2013. Since then earnings-per-share have grown by 16% annually. This year AbbVie’s earnings-per-share will increase significantly again, driven by lower taxes and ongoing growth from drugs such as Humira and Imbruvica.Management is positive about being able to replace Humira’s revenues during the 2020s.
All in all, I think AbbVie will be a great addition to my Vrijheid Fonds. And with the expected grow of the EPS, the dividend will be safe in the coming years.
What are you – the readers, thoughts on AbbVie Inc.? Is it a buy, do you own it? I like to hear from you!
Thanks for stopping by!
Cheers,
Pollie.
Disclaimer: I’m not a registered investment adviser, investment professional, brokerage firm or investment company. Readers are advised that information on the website is issued solely for information purposes and not to be construed as an offer or recommendation to buy, hold, or sell any securities. All information, opinions, and analyses included are based on sources believed to be reliable, but no representation or warranty is made concerning accuracy, correctness, timeliness, or appropriateness. Please consult with an investment professional before investing any of your money.
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It surely is for me. It is one of my bigger holdings in my still very little portfolio.
I hope to be a fellow owner in the near future
I just bought some in 77.70$!
GL
What a nice price! Congrats
Abbvie is a nice stock, unfortunately keeps nose diving these days.
I’m hoping for this
nice write up
Great stock that ill be adding to my position before their ex dividend date if they stay at these levels.
Seem to be dropping slowly, but most healthcare stocks seem to be.
cheers Pollie
Thanks, I’m hoping that they will drop in price a little bit more 😉
“Can I explain this to a 10 year old” – absolutely loved this.
FYI – I’ve owned ABBV since 2015 and have enjoyed the dividend increase from .51 cents to 1.07 a quarter. The only thing I worry about is they pretty much had a monopoly on the greatest drug in the world (Humira) – but now biosimilars have entered the market and they needed to discount the price about 80% to compete. Its going to be difficult to predict if they can come out with another blockbuster to make up for the loss of their cash cow. For that reason I’m not adding to my position until I see if any more growth can take place.
Thanks for your information!
It’s one of my larger positions. Solid returns so far so when the rest of my portfolio is beefed I’ll expand my position in Abbv.
I’m looking for a nice buying opportunity for ABBV
Dangerous industry. It all depends on the next succes. You can earn a lot of money this way or loose a lot as well.
I personally don’t invest in these business types. To much gambling for me. But with a bit of luck you can make a lot of money.
What I am wondering, do you have the knowledge to look at, and did you look at the pipeline of new medicine? What medicines are in which stage of research? How promising are they? What are the chances for long term succes? I believe this is much more important for pharma research companies like Abbvie to determine if they are worth it to invest in.
I personally like my Abbott shares much more. Recurring sales and predictable growth. Consistent dividend raises. Much less risk.