Abbott Labs stock and its dividend hold a special place in my portfolio.
Why? I worked at Abbott for nearly 10 years.
During that time, I worked my way up the finance and accounting ranks as best I could. But that was many years ago. I’m much happier to just be an owner making money from dividends now. Not an employee earning a salary.
Abbott has changed dramatically since I worked there. So let’s check to see how the Abbott Labs stock dividend stacks up today. Also, we will look at some recent Abbott stock predictions from top analysts and research firms.
I will also check in with Simply Investing to see what they think about Abbott stock. I subscribe to the Simply Investing report. Feel free to read my full review of the Simply Investing report here.
Disclosure: This post contains referral links.
Abbott Labs Company Background
Abbott has been in business for more than 125 years. The company is truly global and operates in over 160 countries with 107,000 employees.
As a company that operates in the health care sector, Abbott’s product lines are focused on 6 main areas.
First of all, Cardiovascular. These products provide innovative technologies that can improve the way doctors treat people with vascular diseases, irregular heartbeats and diseases of the heart’s valves.
Diabetes helps people manage their health more effectively and comfortably. Abbott’s testing products provide accurate data to drive informed care decisions.
Diagnostics makes instruments, tests, automation tools, and information solutions. They allow for a fast and accurate diagnosis of the patient’s condition. These products are sold to hospitals, reference labs, blood centers, emergency departments, physician offices, and clinics.
Neuromodulation treats people living with chronic pain and movement disorders. Abbott’s portfolio of therapies helps them move and feel better. Hence, reducing chronic pain.
Nutrition produces science-based nutrition products for people of all ages. Brand name products include Similac, PediaSure, Pedialyte, Ensure, Glucerna, EAS and ZonePerfect.
The pharmaceutical area brings trusted brands to people in developing countries around the world. Treatments concentrate on gastroenterology, women’s health, cardiovascular, pain management, central nervous system disorders, respiratory and influenza.
Source – Abbott at a glance
Finally, Abbott Labs stock trades on the New York Stock Exchange under the ticker symbol ABT.
Abbott Dividend Per Share & Dividend Yield
The Abbott Labs dividend is $1.44 per share. Furthermore, based on the recent stock price, the dividend payout puts the Abbott dividend yield at 1.4%.
Finally, what months does Abbott pay dividends? The dividend payment months are February, May, August, and November.
Abbott Dividend History & Dividend Growth Track Record
Next, this is sourced from the Abbott investor relations website.
Abbott states the following about its dividend payment practices.
Dividends are an important part of Abbott’s heritage and investment identity. Abbott has declared 384 consecutive quarterly dividends since 1924 and has increased the dividend payout for 48 consecutive years.
Abbott is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for 25 consecutive years.
I really like it when a company touts its dividend track record. Certainly, Abbott is not a high yield stock to get excited about. But, Abbott’s dividend history is impressive.
Recent dividend growth has been solid too. So let’s check out Abbott’s dividend growth and see exactly how it measures up.
Abbott Labs Dividend Increases & Growth Rate
Abbott dividend increase history over the past 7 years is shown in the table below.
|1 Year||3 Years||5 Years||7 Years|
Abbott’s dividend yield is fairly low at less than 2%. So, it is nice to see a series of double-digit percentage dividend increases. In my opinion, this is a company giving investors high dividend growth.
In fact, the last 2 annual Abbott dividend increases have been outstanding. Most recently, 12.5%. And the year before, a 14.3% dividend increase!
Abbott Labs Revenue Trend
Acquisitions have been a big part of Abbott’s revenue growth.
In 2017, the company purchased St. Jude Medical for $25 billion. This acquisition established Abbott as a leader in the medical device area.
After clearing regulatory hurdles, they also acquired Alere for $5.3 billion in 2017. This made Abbott a leader in the $7 billion point-of-care diagnostics market.
On the downside, financing these acquisitions likely kept Abbott’s dividend increases in 2017 and 2018 on the smaller side. However, Abbott’s dividend increases in 2019 and 2020 have more than made up for it.
Abbott Labs Dividends and Earnings Per Share
Due to the acquisitions, accounting earnings are difficult to interpret. Because of this, Abbott also reports an adjusted earnings number.
Adjusted earnings factor out the impact of intangible asset amortization, restructuring costs and other expenses. Adjusted earnings provide a much smoother profit trend over the long run.
With that said, the last 2 years in the chart show the Abbott dividend payout ratio based on earnings running at 60%. This is a very safe level for a company that has such a steady demand for its products.
Let’s also look at Abbott’s dividend payments compared to free cash flow. This will help in assessing dividend safety.
Abbott Dividends Paid Vs. Free Cash Flow
Over the past three years, Abbott’s stock dividend distributions have run at less than 50% of free cash flow. This is a comfortable dividend payout ratio.
Abbott has used the balance of its cash flow to aggressively reduce debt. So, let’s look at the company’s financial position next to see the impact.
Abbott Credit Rating and Balance Sheet
Moody’s and S&P rate Abbott A3 and BBB+, respectively. Their ratings represent “investment grade – low to moderate credit risk” evaluations.
Abbott took on a significant amount of debt to fund the acquisitions of St. Jude and Alere in 2017. However, as I just mentioned, the company has reduced that debt in subsequent years.
Abbott’s credit rating has improved since I last reviewed the company. This is likely a sign of the reduced debt load. Also, the company’s debt to equity ratio stands at only .6 to 1.
Abbott Stock Dividend Safety
I make a judgment about dividend safety for every dividend stock I own. It helps me to avoid dividend reductions from stocks in my dividend stock investment portfolio.
To do this, I assess the factors we have discussed thus far:
- Business fundamentals
- Abbott’s dividend payout ratios
- Historical dividend track record
- Credit ratings
- Financial position
Certainly, Abbott has a long, rich history of dividend payments and positive business fundamentals.
Based on this and the other areas just mentioned, I view Abbott’s dividend to be very safe from a reduction for the foreseeable future.
Abbott Labs Stock Dividend Growth Forecast
In order to make a plan for my future dividend income from Abbott Lab’s stock, I make a forecast for Abbott’s annual dividend growth.
My Abbott stock dividend forecast is based on:
- Historical dividend growth
- Dividend payout ratios
- Business fundamentals
- Company growth strategy
- Company dividend policy (when provided)
My best estimate is that Abbott’s dividend will increase by 7-9% annually.
Abbott Labs Stock Valuation
At the moment, Abbott Labs stock looks fully to slightly overvalued to me. Let’s look at the value of Abbott’s stock from a couple of different perspectives to prove this out.
Abbott Dividend Discount Valuation Model
First up, I used the Gordon Growth Model to calculate a fair value for Abbott’s stock price. The model considers several of the factors discussed thus far. Specifically,
- Current dividend payment – $1.44 per share
- Projected dividend growth – 8%
- My desired annual return on investment – 10%
Using these assumptions, the model estimates the fair value of Abbott stock to be $78 per share.
Morningstar Fair Value Estimate
This may just be a coincidence. However, the investment analysis firm Morningstar also places a fair value estimate on Abbott stock at $78 per share
Simply Investing Report Valuation of Abbott Stock
The Simply Investing Report has strict rules to judge a stock’s value. Those rules are:
- Stock price to earnings ratio must be 25 or below
- The current dividend yield must be higher than the average dividend yield over the past 20 years
- Stock price to book ratio should be 3 or less
If a stock meets these 3 rules, it is considered undervalued. Otherwise, it is considered overvalued.
Currently, Abbott Labs stock is considered overvalued by the Simply Investing Report.
Abbott Labs Stock Valuation Wrap Up
That’s our look at Abbott stock valuation. All measures indicate that Abbott stock is currently fully valued. Perhaps, slightly overvalued.
But that’s not all. Before concluding, let’s check out some of the Abbott stock predictions from professional analysts covering the company.
Abbott Stock Predictions
Argus Research has a buy rating on Abbott stock. They predict Abbott stock could reach $110 per share in 2020. However, the broader analyst community does not have as positive of a forecast.
According to Market Beat, 19 Wall Street analysts have issued ratings and price targets for Abbott Labs stock in the last 12 months. Their average twelve-month price target for Abbott stock is $93.
Abbott Dividend Stock Analysis Conclusions
Abbott is a very solid company. They have a strong operating history and pay a consistent stream of dividends.
Finally, add in Abbott’s dividend growth track record and Abbott is always one of those good dividend stocks to keep an eye on.
Is Abbott Stock A Good Investment?
Abbott stock is a good investment from my perspective. I have been a long-time shareholder. And expect to hold my shares for many years to come. Abbott stock currently holds a mid-size position in my dividend stock portfolio.
Is Abbott Stock A Buy?
The stock currently looks fully valued at the recent price levels. This is not surprising given that Abbott’s stock price has nearly doubled during the past 3 years.
Also, to add to my shares, I would prefer a higher dividend yield closer to 2%
So, I’m happy to hold for the long-run. And, I’d love to add to my holdings at less than $80 per share
Related Articles & Resources About Dividends In the Health Care Sector & Beyond
Interested in other health care or pharmaceutical dividend growth stocks?
Then be sure to check out my Abbvie and Medtronic dividend stock reviews.
Do you prefer to do your investing through ETFs? Then you might like to know that Abbott is a top holding in this Vanguard ETF.
Don’t forget to check out the Simply Investing Report. Click the logo below to learn more. I use it as a reference whenever I’m assessing the prospects of my favorite dividend stocks.
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